Navigating the complexities of employment taxes in Egypt is a critical aspect of compliant operations for any business employing staff in the country. Employers are responsible for understanding and adhering to specific regulations regarding both their own contributions and the amounts they must withhold from employee salaries. This involves managing social security contributions, income tax withholding, and various reporting obligations to the relevant Egyptian authorities.
The Egyptian tax system, particularly concerning employment, is primarily governed by the Income Tax Law and the Social Insurance Law. These laws mandate contributions from both employers and employees, calculated based on employee compensation. Proper management of these obligations ensures legal compliance, avoids penalties, and maintains good standing with the government bodies overseeing taxation and social security.
Employer Social Security and Payroll Tax Obligations
Employers in Egypt are required to contribute to the social security system on behalf of their employees. These contributions cover various benefits including old age, disability, death, work injury, unemployment, and sickness. The contribution rates are applied to specific components of an employee's salary, typically divided into basic salary and variable salary, up to certain maximum caps.
Based on current regulations expected to apply in 2025, the social security contribution rates are generally as follows:
| Contributor | Rate on Basic Salary | Rate on Variable Salary |
|---|---|---|
| Employer | 18.75% | 10.75% |
| Employee | 11% | 10% |
| Total | 29.75% | 20.75% |
- Basic Salary: This component is defined by law and typically represents a fixed portion of the salary.
- Variable Salary: This includes allowances, bonuses, incentives, and other variable compensation elements.
- Contribution Caps: There are maximum monthly caps for both basic and variable salaries on which contributions are calculated. These caps are subject to annual increases. For 2025, the specific cap amounts will be determined, but they are based on a formula linked to average wage increases. Contributions are calculated on the actual salary components up to these respective caps.
Payroll tax, in the Egyptian context, often refers collectively to the employer's responsibility for managing both social security contributions and income tax withholding from employee salaries before remitting these amounts to the government.
Income Tax Withholding Requirements
Employers are legally obligated to withhold income tax (also known as salary tax or payroll tax) from their employees' monthly salaries and remit it to the Egyptian Tax Authority (ETA). Egypt operates a progressive income tax system, meaning higher income levels are taxed at higher rates. The tax is calculated on the employee's gross salary after deducting mandatory social security contributions and any applicable personal allowances.
For the tax year 2025, based on the current tax law structure, the annual income tax brackets and rates are expected to be as follows:
| Annual Net Taxable Income (EGP) | Tax Rate |
|---|---|
| Up to 21,000 | 0% |
| From 21,001 to 30,000 | 2.5% |
| From 30,001 to 45,000 | 10% |
| From 45,001 to 60,000 | 15% |
| From 60,001 to 200,000 | 20% |
| From 200,001 to 400,000 | 22.5% |
| Above 400,000 | 25% |
- Calculation: The tax is calculated monthly based on the annualized net taxable income. The employer must determine the employee's total gross monthly income, subtract the employee's share of social security contributions and the monthly portion of the personal allowance, and then apply the progressive tax rates to the resulting net taxable income.
Employee Tax Deductions and Allowances
Employees in Egypt are entitled to certain deductions and allowances that reduce their taxable income. The primary allowance is a personal allowance granted annually.
- Personal Allowance: Based on current law, the annual personal allowance is EGP 15,000. This amount is deducted from the employee's gross annual income before applying the tax brackets. For monthly tax calculation purposes, this allowance is typically divided by 12 and deducted from the monthly gross income.
- Social Security Contributions: The employee's mandatory contributions to social security are also deductible from their gross income for income tax calculation purposes.
- Other Potential Deductions: While the personal allowance and social security are the most common, certain other limited deductions might be permissible under specific circumstances as defined by the tax law.
Tax Compliance and Reporting Deadlines
Employers in Egypt have specific deadlines for reporting and remitting withheld taxes and social security contributions.
- Monthly Filings (Form 4): Employers must file a monthly tax return (Form 4) detailing the salaries paid, taxes withheld, and social security contributions for all employees. This return, along with the payment of the withheld income tax and both employer and employee social security contributions, is typically due by the 15th day of the following month.
- Annual Reconciliation: An annual reconciliation of payroll taxes is required. This involves submitting a comprehensive report summarizing all salaries paid, taxes withheld, and social security contributions made throughout the calendar year. The deadline for this annual submission is generally by the end of January of the following year.
Adhering to these deadlines is crucial to avoid penalties and interest charges.
Special Tax Considerations for Foreign Workers and Companies
Foreign workers employed in Egypt are generally subject to the same income tax and social security regulations as Egyptian nationals if they are considered tax residents. Tax residency is typically determined by the number of days spent in Egypt (e.g., more than 183 days in a 12-month period).
- Tax Residency: Non-resident foreign workers are generally only taxed on income sourced from Egypt. However, for employment income, the location where the work is performed is key. If a foreign worker is physically working in Egypt, their salary is typically subject to Egyptian income tax and potentially social security, depending on their home country's social security agreements with Egypt.
- Social Security Agreements: Egypt has bilateral social security agreements with several countries. These agreements can exempt foreign workers from contributing to the Egyptian social security system if they are contributing to their home country's system, provided certain conditions are met and proper documentation is obtained.
- Foreign Companies: Foreign companies employing staff in Egypt, even if they do not have a registered local entity, are still responsible for fulfilling employer obligations, including tax withholding and social security contributions. Utilizing an Employer of Record (EOR) service is a common approach for foreign companies to ensure compliance with these local payroll and tax requirements without needing to establish a legal entity in Egypt. The EOR acts as the legal employer for tax and compliance purposes.
