Monthly Accounting Close in an Egyptian Company: What Closes and Why

At every monthly close the bank accounts are reconciled to their statements, cash and customer and supplier balances are agreed, stock is costed, depreciation is posted, and the month carries only its own share of prepaid and accrued expenses. The aim is a reliable annual figure: Companies Law No. 159 of 1981 requires the board of a joint-stock company to prepare the company's financial statements for every financial year, and the ordinary general meeting ratifies them (articles 64 and 63 of Law 159). The monthly close is the discipline behind that figure, not a cosmetic step.

As a rule, the employer remits withheld salary tax and pays social insurance contributions every month, and a VAT registrant files a return for each month within the following month. Balances and transactions between entities of the same group are eliminated on consolidation.

Balances and the accrual basis

The close starts with every bank account reconciled to its statement and the differences cleared; the method is in Bank Reconciliation in Egypt. Customer and supplier statements are agreed to their general-ledger balances, an unexplained difference is not accepted, and this updates the ageing behind the expected-credit-loss provision and the follow-up of collections and payments.

Stock closes by agreeing the book balance with a periodic or perpetual count and costing the month's movement, since period profit rests on that figure first. Fixed assets close by recording the month's additions and disposals in the register and posting depreciation, so the ledger balance still reflects a real register, not a figure nobody checks until year-end.

A prepaid expense is charged to the month by its own share only, and an accrued expense due but unpaid is posted before the month closes, not after; otherwise one month's profit moves into a month it does not belong to. The monthly figure rests on accrual, not on collection or payment. Entries and common errors are in Prepaid and Accrued Expenses in Egypt.

Balances with related parties are agreed every month, because a difference missed monthly is hard to explain by year-end. Paragraph 4 of Egyptian Accounting Standard 15, Related Party Disclosures, as substituted by Minister of Investment and International Cooperation Decree 69 of 2019, requires the entity's own statements to disclose transactions and outstanding balances with other group entities, and states that "transactions between the entities of the group and the outstanding balances are eliminated in preparing the group's consolidated financial statements, except those between an investment entity and its subsidiaries that are measured at fair value through profit or loss" (unofficial translation).

Payroll and its tax and social-insurance liabilities

Payroll closes on two separate liabilities, each with its own date. Withheld salary tax is remitted to the competent tax office within the first fifteen days of each month for what was withheld in the previous month (article 14 of the Income Tax Law issued by Law No. 91 of 2005). Social insurance contributions due for a month are paid from the first day of the following month, and the employer is exempt from the additional amount if payment is made within fifteen days of the due date (article 71 of the executive regulations of the Social Insurance and Pensions Law issued by Law No. 148 of 2019, issued by Prime Ministerial Decree 2437 of 2021). Closing payroll means the run's withholdings match what will actually be paid to both.

The contribution base is not the same for every worker. Private-sector workers under the Labour Law are assessed for the calendar year on their January wage, and a worker who joins after January on the wage of the month of joining until the next January. Assessment on each month's wage applies to workers in the state administration, public bodies and institutions, the public sector and the public business sector (articles 3 and 70 of the regulations). Enterprises within Law 6 of 2025 on certain tax incentives and facilities for enterprises whose annual turnover does not exceed EGP 20 million are limited, for salary tax, to filing the annual tax settlement return with payment of the tax (article 12 of Law 6 of 2025).

VAT and the withholding account

The VAT tax period is one month ending on the last day of the calendar month (article 1 of the VAT Law issued by Law No. 67 of 2016), and every registrant must file a monthly return for it with the competent tax office within the following month (articles 29 and 31(a) of the Unified Tax Procedures Law issued by Law No. 206 of 2020). Closing the VAT line means agreeing output tax and deductible input tax with the month's books before the return is drafted, since anything found after filing requires the return to be amended.

Enterprises within Law 6 of 2025 instead file every three months, within the month after the period ends, with payment of the tax (article 12 of Law 6 of 2025). The law is not automatic: it applies to those that apply to benefit from it, except the cases excluded by article 4 (articles 1 and 4 of Law 6 of 2025). See Egypt's Simplified Tax Regime for Small Enterprises.

The account for tax the company has withheld from its payments to others is agreed in the same way with its quarterly Form 41; withholding on account of tax (commonly called withholding tax) and Form 41 are in Withholding tax in Egypt.

Enterprises within Law 6 of 2025 are not subject to the withholding system (article 11 of Law 6 of 2025), and the Egyptian Tax Authority's Executive Instructions 25 of 2025 apply this both ways: nothing is withheld from such an enterprise, and it need not withhold (item 13 of Executive Instructions 25 of 2025). Article 11 does not say expressly that the enterprise need not withhold; that point rests on the instructions, which are the Authority's administrative interpretation and rank below the law. Twelve consistent monthly closes ultimately feed the annual return, covered in Corporate tax returns in Egypt.

What the monthly close feeds directly is below; the other dates are in Egypt's tax and social insurance compliance calendar.

Management accounts and locking the period

The practical point is a figure management can read: profit margin, working capital and cash movement, against budget or the same month a year earlier. Annual statements alone do not produce it; monthly closes consistent in their basis do. How to build the budget these figures are compared with is in Budgeting in Egyptian Small and Medium Companies.

The last step is locking the period in the system once its figures are approved, so no later entry dated in a closed month is accepted without deliberately reopening it. A reviewed figure should not move because of an entry added weeks later; a needed correction belongs in the current month, as an adjusting entry stating why.

What we recommend

• Set an internal monthly close timetable for each cycle, ahead of the legal deadline, and reconcile every general-ledger account to its sub-ledger before posting any closing entry.
• Remit withheld salary tax within the first fifteen days of the month after withholding, and pay contributions from the first of the following month, without treating the fifteen days exempt from the additional amount as the normal due date.
• Reconcile the VAT account and the withholding account before drafting any return.
• Eliminate intragroup balances and transactions on consolidation, and disclose them in each entity's own statements.
• Lock the period in the system once its figures are approved, and reopen it only by deliberate decision.

The firm's Accounting & Bookkeeping Department closes clients' monthly periods and reconciles their balances against their tax and social-insurance liabilities before each return.

Nehal Saied, Partner
Chartered Accountant, Ministry of Finance, Egypt

Member, Egyptian Tax Society
Member, Egyptian Society for Public Finance and Taxation

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Disclaimer: This bulletin is prepared for general information on the legislation in force at the date of its publication. It does not constitute a professional opinion or tax or legal advice on any particular matter, and it should not be relied upon in place of advice based on an examination of the circumstances of each case. Nassef & Partners International accepts no responsibility for any action taken, or refrained from, in reliance on its contents. The positions stated remain subject to subsequent legislation and decisions.