Egyptian Income Tax

Part One
Income tax of Natural Persons

Edited by:
Pro.Said Abd El-Moniem
2014

1
 Lecture SEVEN
Chapter Three
Revenues of Non-
Commercial Professions

Edited by: Dr. Engy El Hawary

The general model of measureming the tax net profit
Particulars L.E. L.E.
1- Taxable Revenues:
- Revenues from profession xx
- Capital gains xx
- revenues for transfer of expertise or closing the office or assignment xx
Total annual revenues xx
Allowable deductions:
1. Costs for practicing the profession (xx)
Taxpayer keeps regular books (all cost are deducted
Taxpayer not keeps regular books(10% of total revenue)
Taxable net profit before contributions xx
2-Contributions: (whether has regular books or not)
2-1.Contribution to the government units (not exceeding net revenue) (xx)
2-2.Contributions and subsidies to registered Egyptian societies and (xx)
institutions (within 10% of net revenue)
Taxable net profit after contributions xx

2-4. Private pensions fund subscriptions xx

2-5. Life and medical insurance premiums xx
(total 2-4 and 2-5 should not exceed L.E. 3000 per year and have regular
books))
(xx)
Example 3-2
The following are receipts and payments of a physician who practices
profession in his private clinic for the year 2014:
1-Receipts: L.E 25000 fees for examination at clinic L.E 5000 fees
for examination in home visits L.E 53000 fees for surgical operations
L.E 4000 capital gains from selling medical appliances of his clinic .
2 -Payments: L.E 19000 salaries of nurses and assistants L.E 1800
electricity and water L.E 5000 purchase price of medical appliances
on first January 2014 (It is depreciated at 20% yearly) L.E 500
subscriptions in physicians syndicate for pension L.E 2000
contributions to government L.E 5000 contributions to Al Nour Mosque
in Abbassia L.E 3500 insurance premium on the taxpayer's life to his
favour LE 1200 purchase price of books and magazines L.E 1800
telephone expenses L.E 900 cleaning expenses 800 buffet
expenses L.E 900 gratuities .
So, if you learn that:1- Taxpayer keeps regular books, and he does not
have another sources of income. 2 - All expenses supported by
documents except cleaning, buffet and gratuities expenses.
Required:
1-To determine tax base of income of
natural persons for the year 2014.
2-To calculate tax due .
Taxable revenues: L.E L.E
1 fees for examination at clinic 25,000
2 fees for examination in home visits 5,000
3 fees for surgical operations 53,000
4 Capital gain from selling medical appliances of his clinic 4,000
Total Taxable Revenue 87000
Deductions
1. Costs for practicing the profession
a-salaries of nurses and assistants 19,000
b-electricity and water 1,800
c-depreciation of fixed assets (20%*5000) 1,000
d-books and magazines 1,200
e-telephone expenses 1,800
Total deductions 24800
2- Costs not supported by documents
cleaning expenses 900
buffet expenses 800
gratuities 900
total 2600
maximum limit 1736 1736
Taxable net revenues 60464
2-Contributions:
a.Contribution to the government units 2000
b- Contributions to Al Nour Mosque in Abbassia (the lower of the following):
actually paid 5000
6046.4 5000 7000
Net Revenue after contributions 53464
3 Private pensions fund subscriptions, and Life and medical insurance
premiums
maximum amount 3000
actually paid (500+3500) 4000 3000
Tax due:
5000 exempted
(20000-5000)*10%= 1,500
(40000-20000)*15%=2,000
(50464-40000)*20%=2,093
total tax due = 5,593
Example (3-3) : taxpayer has no regular
books
A taxpayer owns a private office to practice profession of Accounting
and Auditing, revenues of which were estimated arbitrarily for 2014 at
L.E 50000. So, if you know the following
1- He sold some equipment and tools in his office at L.E 20000, noting
that its book value amounted to L.E 8000,
2- He pays annually a life insurance premium of L.E 1500 to favour of
his minor children.
3- He own the first prize in a lottery of the Egyptian first Aid Society
registered amounting to L.E 9000 of which he donated L.E6000 to the
society.
4- He does not have another source of income.
Required
1- To determine taxable net revenue of non-commercial professions.
2- To calculate tax due.
Solution:
Taxable revenues: L.E L.E
1-Revenues of non-commercial professions 50,000
2- Capital gain from alienation of equipment and tools=
20,000-8,000
12,000
Total Taxable Revenue 62,000
Deductions:
1. Costs for practicing the profession
62,000*0.1 6,200
Total deductions 6,200
Taxable net revenues 55,800
2-Contributions:

b- Contributions to (EFAS) approved by the government

(the lower of the following):

actually paid 6,000

5580 5580 5580
Taxable net revenue 50,220
Tax due:
5000 exempted
(20000-5000)*10%= 1,500
(40000-20000)*15%=2,000
(50,220-40000)*20%=2,044
total tax due = 5,544
The tax legislator authorized the
taxpayer who keeps regular books to
carry forward the losses of one year
to be deducted from the profits of
the following year or years (maximum
5 years)
Example 3-4:
The following are taxable revenues and losses
of a physician who has a private clinic and keep
regular books
Years Taxable Net Revenue Taxable Net Losses
2005 50,000
2006 10,000
2007 20,000
2008 15,000
2009 10,000
2010 4,000
2011 20,000

Required : Determine the adjusted taxable net

revenue
Years 2005 2006 2007 2008 2009 2010 2011
Solution:
Taxable net revenue (50,000) 10,000 20,000 15,000 (10,000) 4,000 20,000

Carried loss 2005/1 (50,000)

(40,000)
Carried loss 2005/2 (40,000)
(20,000)
Carried loss 2005/3 (20,000)
(5,000)
Carried loss 2005/4 (5,000)
(15,000)
Carried loss 2005/5 (5,000)

Non carried loss 2005/6 (1,000)

Carried loss 2009/1 (10,000)
Carried loss 2009/2 (10,000)

Adjusted taxable net revenue 10,000

 Prescribed Tax Exemptions
Revenues of new
members of free
Revenues of professions
editing and Revenues registered as
translating received by members of their
teaching staff professional
books and Revenues of syndicates for only 3
religious, at universities members of years from the date of
Educational scientific, and institutes the Formative practice added to
cultural and for their books
institutions, literary articles. Artists which is the training
subject to the and teaching Syndicate period required by the
except for notes authored profession's practice
supervision of proceeds from pursuing the
law, public service
for distribution production of
the the sale of among students period, military
government or photography,
printed work or according to the sculpture and service or reserve
public sector translation with regulations and service period.
engraving
a view to prices set by the The period of
producing it in universities and exemption will be 1
an audio or institutes year if 15 years passed
visual format. from graduation (the
exemption should not
exceed 50,000 in this
case)
 Example 3-5
Taxable net revenues realized during the one of
exemption period for a physician (15 years passed from
his graduation) amounted to L.E 150,000.

Required : To calculate tax due

 Solution

Since, taxable net revenues exceed L.E 50000,

therefore, tax due is calculated on L.E 100000
as follows :
5000 exempted
15,000 x 10% = 1,500
20,000 x 15% = 3,000
60,000 x 20% = 12,000
Tax due = 16,500
 Example 3-6
Engineer Nabil Abd-El Moniem is employed by a private sector company gets L.E 900 per
month as a basic salary (of which L.E. 150 special increment). In addition, he receives
monthly L.E 400 as representation allowance, L.E 200 as transport allowance to meet actual
expenses, and L.E 350 as special increment not added to basic salary.
He also owns a private office whose receipts and payments during 2014 were as follows:
1. Receipts (in L.E) : 47500 fees for engineering (after deduct the amount to account of tax
5%) 9000 his share in fees of designs jointly made with other engineers 7500 fees for
building designs in Kuwait 500 remuneration for publishing a paper in the engineering
Bulletin 5000 sales price of some equipment and tools in his office, its book value of which is
L.E 1500.
2 .payments (in L.E): 1500 office rent - 4200 salaries of office employees 180 subscription to
syndicate (of which 120 to pension fund) 3600 for life insurance premium to favor of his wife
300 contributions (of which L.E 120 to government and the rest to society of animal care) -
400 Electricity and water.
So, if you know the following:
a - Taxpayer keeps regular books.
b - Depreciation of fixed assets in his office for 2014 of L.E 1240.
c - He paid during the year L.E 145 for salaries tax
d - His share in social insurance is L.E 1878.
Required 1- To determine tax base of income of natural persons for 2014.
Salaries and the like:
Total revenue L.E L.E
1 Basic Salary 900*12 10800
2- Variable Wages
Representation allowance 400*12 4800
Transportation allowance 200*12 2400
Special increment (not added to basic salary)350*12 4200 11400
Total Revenue 22,200

Deductions L.E L.E

1 sums exempted by special law
special increment (150+300) *12 6000 6000

2 sums to meet actual Expenses transportation 200*12 2400

3 Personal Exemption 7000
4 Share of employee in Social insurance 1878
Total deductions 17,278
Net Revenue 4,922

5 life insurance
738.3
3000
3600 3000
3000
Taxable net revenue 1,922
Revenues of Non-Commercial professions:
Taxable revenues: L.E L.E
1 fees for engineering (47,500/0.95) 50,000
2 Fees jointly 9,000
3 Fees from Kuwait (NOT TAXED as it is outside Egypt) NIL
4- Remuneration for publishing a paper (exempted) NIL
5 Capital gain from selling an equipment (5000-1500) 3,500
Total Taxable Revenue 62,500
Deductions
1. Costs for practicing the profession
a-office rent 1,500
b-salaries of employees 4,200
c-Subscription to syndicate (180-120) 60
d-electricity and water 400
e-depreciation of fixed assets in office 1,240
Total deductions 7,400
Taxable net revenues 55,100
2-Contributions:
a. Contribution to the government units 120

b- Contributions to ACS approved by the government (the lower of the following):

actually paid 180
5510 180 300
Net Revenue after contributions 54,800

3 Private pensions fund subscriptions, and Life and medical insurance premiums
maximum amount 3000
actually paid (3600+120)-3000(PREVIOUSLY PAID) 720 720
Taxable net revenue 54,080
Tax Base:
L.E
Salaries and the like 1,922
Revenues of non-commercial profession 54,080
Tax base 56,002

Tax Due:
L.E
5,000 EXEMPTED
(20,000-5,000)*10% 1,500
(40,000-20,000)*15% 3,000
(56,002-40,000)*20% 3,200
Tax due 7,700
Less: amount paid (145+2500) (2,645)
Tax payable 5,055
End of Chapter