Egypt’s location and tradition of trade, primary industry and manufacturing mean that it has one of the widest economies in the region. This broad base, coupled with a large population, and recently announced measures to attract foreign investors, has led to renewed interest in investment. Today, Egypt has an attractive tax regime and other incentives to attract local and international investors to set up stores within the country’s borders. In 2015, the government introduced amendments to the Investment Law with this purpose in mind. Among the measures included in the amendments is the reduction of sales taxes and customs duties specifically for foreign investors. Therefore, the Egyptian tax law advice for foreign businesses is one of the most important things that must be identified first in order to ensure the continuity of foreign business within the Egyptian territory in a safe and legal manner represented by all procedures and regulations.
Tax benefits for foreign entities
For resident foreign companies in Egypt, foreign taxes paid on overseas profits are educible from their Egyptian tax bill, but with some limitations. Here’s a breakdown:
- Deductible Foreign Taxes: Companies can deduct foreign taxes paid on their foreign profits, provided they have the necessary documentation.
- Non-deductible Foreign Losses: Losses incurred abroad cannot be subtracted from the company’s Egyptian tax base for the current or future tax periods.
- Foreign Tax Credit Limit: The deductible foreign tax amount cannot exceed the total Egyptian tax liability calculated according to Egyptian law.
In simpler terms, companies can offset some foreign taxes against their Egyptian tax bill, but foreign losses and exceeding the Egyptian tax liability don’t qualify for deductions.
Strategies for corporate international Tax planning
Corporate international tax planning poses significant challenges for companies operating across multiple countries. Strategic planning is essential to avoid pitfalls such as international double taxation and ensure compliance with complex and ever-changing tax laws in each jurisdiction.
The Organization for Economic Cooperation and Development (OECD), tasked with promoting trade among its 38-member countries, coordinates international tax management policies. Proposed changes to international tax standards, including a global minimum tax and stricter transfer pricing documentation requirements, will impact multinational companies. Compliance with these standards demands greater transparency, necessitating control over tax data through updated tax technology and automated data management systems.
The OECD’s Base Erosion and Profit Shifting (BEPS) rules encompass 15 actions that tax teams must anticipate and address. These actions aim to prevent tax avoidance by ensuring profits are taxed where economic activities occur and value is created. Compliance with new BEPS requirements, including Mandatory Disclosure Rules (MDRs) and extensive reporting obligations, presents a significant challenge for tax teams, complicating tax assessment processes.
Analyzing your company’s risks regarding reporting regulations is crucial, as taxes are inevitable. Preparation and total transparency are key strategies for navigating evolving regulations. Conducting a thorough risk analysis enables the development of a strategic plan and ensures the implementation of appropriate systems and tools to automate processes and gain clarity in tax management.
To get more information about Egyptian tax law advice for foreign businesses, don’t hesitate and get in touch with “Consortio Law Firm” team, who aim to provide special legal support that helping establish successful business in Egypt.
Just call us now through the phone number 002 01028806061 or via WhatsApp or email Info@consortiolawfirm.com.
