Credit Management December 2022

COUNTRY FOCUS
AUTHOR – Adam Bernstein
Petrochemicals (2002-2022).
To illustrate this, the Chemical and
Fertilisers Export Council released a
report in August 2022 which stated that
Egypt’s chemical exports witnessed a 35
percent increase in the first half of 2022,
rising to $4.33bn, compared to the same
period in 2021 of $3.21bn.
Tourism
With such a storied history and a warm
– hot – climate, Egypt’s tourism sector is
an important part of the economy. But
it’s also subject to political events and
security issues. The 2011 revolution and
subsequent events, for example, led to a
34.7 percent drop in tourist numbers and
a 47.9 per cent decrease in revenue in
2014/2015. Terrorism in the Sinai and the
bombing of a cathedral caused massive
losses along with, in places, a nearly 90
percent layoff rate among 700,000 workers
in 2016 and 2017.
However, tourism did grow again with,
in 2018, around 11.6m visitors. But then
came the COVID-19 pandemic. Two years
on it is expected that tourism will have
rebounded.
According to the Central Agency
for Public Mobilization and Statistics,
Europeans accounted for 64.3 percent
of the total number of tourists in 2019,
and Arab tourists accounted for 24.3
percent, Americans 4.2 percent and other
nationalities 7.2 percent.
Statista reckons that in 2019, the
number of rooms in hotels and similar
establishments amounted to 202,430
units; however, the number of rooms
peaked in 2010 at close to 226,000 units.
Hotelmanagement.net noted that, in 2018,
there were 300 chain hotels and resorts
across major cities, including Sharm El-
Sheikh and Hurghada.
Taxation
Corporate income tax
In Egypt, companies are generally liable
for corporate income tax (CIT) at a flat
rate of 22.5 percent; excluding the Suez
Canal Authority, the Egyptian Petroleum
Authority and the Central Bank of Egypt,
which are liable for CIT at 40 percent.
Firms in oil and gas are liable for CIT at
40.55 percent.
CIT is imposed on companies resident
in Egypt on all profits realised in Egypt
and abroad. For companies that are nonresident
in Egypt, CIT is applied to profits
realised by permanent establishments in
the country.
Personal income tax
In general, this tax is withheld at source
from payments to Egyptians and foreign
Petra is a famous archaeological site in
Jordan's southwestern desert. Dating to
around 300 B.C., it was the capital of the
Nabatean Kingdom. Accessed via a narrow
canyon called Al Siq, it contains tombs
and temples carved into pink sandstone
cliffs, earning its nickname, the "Rose
City." Perhaps its most famous structure
is 45m-high Al Khazneh, a temple with an
ornate, Greek-style facade, and known as
The Treasury.
nationals working in Egypt. It is imposed
on the total net income of the resident
individuals for income earned in Egypt as
well as the income earned outside Egypt
for residents where their activities are
centred in Egypt.
Income of non-resident individuals for
their income earned in Egypt is also liable
to tax.
There are seven income tax brackets
that apply to marginal income. They start
at zero for income up to EGP 15,000 to 2.5
percent (EGP 15,000 to 30,000), 10 percent
(EGP 30,000 to 45,000), 15 percent (EGP
45,000 to 60,000), 20 percent (EGP 60,000
to 200,000), 22.5 percent (EGP 200,000 to
400,000) and a maximum of 25 percent on
income over EGP 400,000.
VAT
The standard rate of VAT is 14 percent
and is levied on all taxable goods and
services unless exempted. Machinery
and equipment used for production
purposes is in contrast subject to a five
percent rate of VAT (although buses and
passenger cars are subject to different tax
rates). Exported goods and services are
subject to zero percent VAT. The threshold
for VAT registration is EGP 500,000 of
annual turnover.
Notably, there is a reverse charging
mechanism that applies to transactions
involving non-residents providing services
to resident entities subject to VAT in Egypt.
The recommendation is that non-residents
appoint a representative or an agent to deal
with obligations including registration,
payment of the tax, the additional tax and
any other due taxes.
Summary
Egypt may not be a first world country.
But it’s not backward either. While there is
a strong, if not authoritarian Government
at the helm, it is relatively stable and
filled with plenty of opportunity. In an
age where resources are everything, UK
exporters should really consider Egypt
as a destination if they have not already
done so.
Adam Berstein is a freelance writer.
Brave | Curious | Resilient / www.cicm.com / December 2022 / PAGE 39