Direct Tax

New income tax law

April 30, 2012

Introduction
Relation between Taxation, Economics & Public Finance

Countries

Individuals

Ruled by public finance

Ruled by Economics

Revenues ,Expenses & balancing Them

Revenues are limited, spend Within such revenue

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Definition of Taxes
Debt of public This faced disapproval as : The state treasury does not refund the amounts to the public thus its a false definition. Taxes are amounts paid for personal security, this faced disapproval as: Personal Security is not a product or service that is subject to Market forces of demand and supply.

Then came Adam Smith with the extensive definition of Taxes as follows

April 30, 2012

Definition of Taxes
TAX
Is a necessary & imposed amount collected from taxpayers ( individuals

& companies) by the government, with no special services to be rendered

in return directly to the tax payers & is paid for social economic welfare, according to the taxpayers capabilities.

April 30, 2012

Definition of Taxes
From the previously mentioned definition, we can conclude the characteristics of the tax which is: A charge: As it is imposed and collected by the state, under strength of its control. Cash: As it is paid in cash and payment cant be in the form of personal or in kind services. For Economic and Social welfare: As there is no direct service or benefit that could be traced for the taxpayer in return. Justice: As it is paid according to the capability of the taxpayer.

April 30, 2012

Classification of Taxes

Direct

Indirect Proportional Progressive

Personal In-kind
Qualitative Unified

April 30, 2012

Classification of Taxes
1. Direct & Indirect taxes:
Direct taxes: Are those taxes where the taxpayer is the one who bears the burden of the tax and cannot pass the burden to another person. Example: Income taxes, Stamp taxes, Salaries Tax. Indirect taxes:

Are those taxes that the taxpayer can pass the burden of the tax to someone else. Example : Sales Tax & Customs.

April 30, 2012

Classification of Taxes
2. Proportional & Progressive taxes:
Proportional taxes: Are those taxes imposed at a fixed rate on the taxable amount regardless of its value. Example: Movable capital revenue tax 32% and Agricultural land tax 14%. Progressive taxes:

Are those taxes that their rates escalates with the increase in taxable amount and decreases when the taxable amount decrease. Example : Unified tax on income of natural persons.

April 30, 2012

Classification of Taxes
3. Personal & In-kind taxes:
Personal taxes: Are those taxes that consider the taxpayers capability and allows him exemptions (minimum family charge allowance). Example: Unified tax on income of natural persons In-kind taxes:

Are those taxes that that the taxpayers personal circumstances are not considered (No personal allowance). Example : Taxes on movable capital revenue

April 30, 2012

Classification of Taxes
4. Qualitative & Unified taxes:
Qualitative taxes: This system imposes the tax on each kind of revenue separately. Example (Law 14 for 1939) Unified taxes: This system imposes the tax on the consolidation of different revenues of the taxpayer at unified rates.

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History of the Egyptian income tax law

The first modern Egyptian Income Tax Law was enacted as law 14 of 1939;

The law was replaced by Law 157 of 1981;

The law was amended by Law 187 of 1993; Issuance of Law 91 of 2005.

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History of the Egyptian income tax law

1.

First Stage: Law 14 for 1939:

One of the most important factors of the reform was the tax system reform. Then a committee of financial and economic characters was selected to study the tax systems in different countries. The committee proposed one of two tax systems as follows: Qualitative Tax System That was imposed in France and Belgium Unified Tax System That was imposed in Great Britain and The States.

The committee finally reached to propose the first tax system qualitative tax system- in September 1938 and which was submitted to the Peoples Assembly. The proposed tax system was then accepted in January 1939 and was issued by law 14 for 1939, but due to the governments need for funds it was made into effect retroactively to September 1938.

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History of the Egyptian income tax law

2.

Second Stage: Law 157 for 1981:

During this stage several fundamental amendments were introduced to the Egyptian Tax System, the most important of which was the publishing of income tax law 157 for 1981, which replaced law 14 for 1939 This law developed and retained the qualitative taxes as a system and crowned it by a general tax on natural persons income. It also introduced an independent tax on the profits of corporations. This introduction of corporate taxes was an important step on the way to the application of the unified tax system.

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History of the Egyptian income tax law

3.

Third Stage: Law 187 for 1993:

Law 157 for 1981 has been an important step that paved the way for shifting the tax system towards being a semi- unified system on the income of natural persons, by establishing an independent tax for corporations profits. In 1993 law 187 was introduced and published. This law imposed semi unified tax on the natural persons income from the following sources: The movable capital revenues Revenues of commercial and industrial activities Non commercial professions revenue Real estate revenue Salaries and the like As well as the taxes on corporations profits.

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History of the Egyptian income tax law

4. Current Stage: Law 91 for 2005:
Canceling the income tax law No. 157 for the year 1981 and its amendments. Canceling state tax on individuals and entities (i.e. 2%) Canceling the tax exemptions in the investment law No. 8 for the year 1997.

Companies established under law No. 8 and started the activities will complete the tax holiday period till be finalized.
Companies obtained GAFI license and started the activities, can get the tax holiday period provided that they should start their activity within 3 years from June 2005.
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4. Current Stage: Law 91 for 2005:

Enforcement date The new tax law issued On June 9th , 2005 The law will come into force from the day following its publication except for: Salaries will apply on July 2005 Salaries. Revenues of commercial & industrial activities, non-professional services and revenues of real estate will apply as of the 2005 tax year. Corporate tax will apply on the 2005 financial statements (which ended on December 31, 2005) or the financial year that starts after the effective date of the law.
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4. Current Stage: Law 91 for 2005:

Executive regulations The executive regulation was issued in December 27th. The existing regulations and provisions are elaborating the new law provisions.

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Structure of the new tax law

1. Introduction / Initial provisions

2.

Tax on individuals Tax on salaries Tax on commercial & industrial activities Tax on professional Tax on real estate Tax on entities Partnerships Corporations Foreign branch

3.

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Structure of the new tax law Continued

4. Tax at source Royalty Know-how fees Interests Service fee
Withholding tax/advance payment Withholding tax Advance payment system

5.

6.
7. 8.

Tax return/Notifications
Penalties Dealing with the tax authority/Final provisions

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