Representative Office Tax in Egypt: PE Risk, Registration and Payroll
What turns a foreign company's representative office into a permanent establishment in Egypt, and what keeps it out? The PE test, tax registration and tax on staff salaries.
By Tax Department · 21 October 2026 · 9 min read
Executive summary
- An "office" is one of the forms of permanent establishment (PE) where all or part of a non-resident's business is carried on through it (Income Tax Law 91 of 2005, article 4, as replaced by Law 30 of 2023).
- A place used solely to collect information, or for any other activity of a preparatory or auxiliary character, is not a PE, unless the exclusion falls away through business carried on in Egypt by the company or a closely related enterprise (article 4 bis).
- A person who has authority to conclude contracts in the company's name, or habitually plays the principal role in concluding contracts that are concluded without material modification by it, is treated as a PE, even if that person works in the office.
- Every taxpayer or person charged with tax must apply for tax registration within thirty days of starting activity (Law 206 of 2020, article 25); in our reading an office that withholds salary tax is such a person.
- Salaries of office staff for work performed in Egypt are taxable even if paid from abroad (article 9). In our view the safer course is for the office to withhold and remit the tax.
- Where a non-resident, unregistered person sells a service in Egypt to an unregistered entity, the recipient must calculate the VAT and pay it within thirty days of the sale, unless the seller is registered under the simplified supplier registration system (VAT Law 67 of 2016, article 32).
The difference between a representative office and a branch is covered in Branch or Representative Office in Egypt, and registering and striking off the office in Registering and Striking Off a Foreign Representative Office in Egypt.
When the office is not a permanent establishment
A permanent establishment is "every fixed place of business through which all or part of the business of a non-resident person's enterprise is carried on in Egypt", and includes "(c) an office" (article 4 as replaced by Law 30 of 2023, in force since 16 June 2023 and not touched by Law 151 of 2026). In our reading, what counts is what is actually done through the office, not the purpose registered for it with the General Authority for Investment and Free Zones (GAFI). The general PE rules and the tax on PE profits are covered in Permanent Establishment in Egypt.
The same law added article 4 bis, "as an exception to the provisions of article (4)". Among its items:
"(d) the use of a fixed place of business solely for the purpose of purchasing goods or merchandise or of collecting information for the enterprise. (e) the use of a fixed place of business solely for the purpose of carrying on any other activity of a preparatory or auxiliary character for the enterprise."
A combination of these activities is also excluded if the overall activity of the place "is of a preparatory or auxiliary character" (item (f)). Article 4 of the executive regulations (Minister of Finance Decree 991 of 2005) defines such work as "every activity that does not contribute to generating income subject to tax in Egypt". It refers to item 5 of the third paragraph of article 4 as originally enacted, an item that has not existed since the article was replaced, and article 4 of the regulations has not been amended since. The same words ("of a preparatory or auxiliary character for the enterprise") appear in item (e), and in our reading the regulations' definition remains a guide to interpreting it.
The exclusion does not apply where the enterprise or a closely related enterprise carries on business activities at the same place or at another place in Egypt and either place is a PE of either of them, or the overall activity is not preparatory or auxiliary and the activities are "complementary functions that are part of a cohesive business operation". In any case, enterprises are closely related where one holds, directly or indirectly, more than 50% of the shares, voting rights or ownership rights. An office of a company that has a branch or a closely related company in Egypt is therefore tested together with them.
What makes the office a permanent establishment
A person working on behalf of the enterprise (here, the foreign company) who has authority to conclude contracts in its name is treated as a PE, unless the activities are limited to purchasing goods or merchandise for it. So is a person who "habitually concludes contracts, or habitually plays the principal role leading to the conclusion of contracts that are routinely concluded without material modification by the enterprise", where the contracts are in its name, or for the transfer of ownership of, or the grant of the right to use, property that it owns or has the right to use, or for the provision of its services (article 4, second paragraph, item (e)). The excluded activities are not a PE where they are carried on by a person who "does not play any role in concluding contracts" (article 4 bis).
| What happens in or through the office | Effect | Source |
|---|---|---|
| Market research and collecting information for the parent only | No PE, unless the exclusion falls away through a related activity | Art. 4 bis (d) |
| Another activity of a preparatory or auxiliary character only | The same | Art. 4 bis (e) and (f) |
| A staff member with authority to conclude contracts in the parent's name, or habitually playing the principal role in concluding them | Treated as a PE on the item's conditions | Art. 4, second paragraph (e) |
| The company providing services in Egypt, including consultancy, through employees for more than ninety days in aggregate in any twelve-month period | Treated as a PE | Art. 4, second paragraph (b) |
| Selling or providing services for consideration to customers in Egypt through the office | A PE in our reading, as the company's business is carried on through a fixed place | Art. 4, first paragraph |
Selling is in any case closed to the office: its purpose is limited to studying markets and production possibilities "without carrying on any commercial activity, including the activity of commercial agents" (Companies Law 159 of 1981, article 173), and it is struck off if it carries on an activity contrary to its purpose (executive regulations, article 319).
Tax registration and the competent tax office
Article 4 of the articles promulgating the Unified Tax Procedures Law 206 of 2020 repealed articles 74 and 75 of the Income Tax Law, which governed notice of the opening of a branch or office and the tax card. The rule is now article 25 of Law 206: "every taxpayer or person charged with tax shall submit to the competent tax office an application for registration within thirty days of the date on which the activity begins". A person charged with tax is one charged "with collecting and remitting the tax" (article 1). In our reading an office that withholds tax on its staff's salaries is such a person, and becomes a taxpayer as well if it is treated as a PE. A taxpayer receives a tax card and a person charged with tax a registration certificate within five working days, each valid for five years (article 27). Any change in the registration data is notified within thirty days (article 28).
The competent office for representative offices, "in applying the provisions of the tax on the profits of legal persons", is the Cairo joint-stock companies tax office, except in the Alexandria, Beheira and Matrouh governorates, where the Alexandria joint-stock companies tax office is competent, "or the office designated by a decree of the Minister of Finance" (article 53/1 of the Income Tax Law executive regulations). The executive regulations of the procedures law allow the head of the Egyptian Tax Authority (ETA) to designate a competent office for particular activities, taxpayers or persons charged with tax (article 1), so the competent office should be confirmed when applying. The books the office must keep are covered in Bookkeeping for Foreign Companies in Egypt.
Tax on office staff salaries
The tax applies to what is due to a taxpayer for working for others for "work performed in Egypt or abroad and paid for from a source in Egypt", and to "what is due to the taxpayer from a foreign source for work performed in Egypt" (article 9). Salaries of office staff for their work in Egypt are therefore taxable, whether paid by the office or by the parent from abroad.
Article 14 requires employers and those obliged to pay taxable income to withhold an amount on account of the tax and to remit, within the first fifteen days of each month, what was withheld in the previous month. Where the employer "is not resident in Egypt or has no centre or establishment there", the duty to remit falls on the person entitled to the income (article 16). The parent is non-resident, but it has a registered office in Egypt where these staff work, so the text can be read as putting the duty on the staff themselves or as leaving it with the office under article 14. In our view the safer course is for the office to withhold and remit, because GAFI's 2026 Investor Services Centre guide requires, for striking off the office, "proof of payment of the state's dues in salary tax and social insurance". The brackets are covered in Egypt's Personal Income Tax Brackets.
Services the office buys from a non-resident
Where a non-resident person not registered with the ETA sells a service in Egypt to a registered person for whom it is not necessary to carry on its activity, or to a government body, public or economic authority "or to any other entity", "the recipient of the service shall calculate the tax due on it and pay it to the Authority within thirty days of the date of sale", unless the seller is registered under the simplified supplier registration system (VAT Law 67 of 2016, article 32, as replaced by Law 3 of 2022). In our reading the office falls within "any other entity", even if it is not registered for VAT.
What this requires
- Record what the office actually does each year and compare it with the items of article 4 bis; keep the studies and evidence of what was sent to the parent.
- Limit the authority of the office manager and staff, in powers of attorney and in practice, so that it does not include concluding contracts in the parent's name or playing the principal role in concluding them; issue no invoices and collect no payments from customers in Egypt through the office.
- Review the activity of any branch or related company of the parent in Egypt before relying on the exclusion.
- Apply for registration within thirty days of starting activity, after confirming the competent tax office, and notify any change within thirty days.
- Withhold and remit salary tax monthly, and reconcile the annual notice of staff and salaries (article 321 of the Companies Law executive regulations) with the salaries on which tax was withheld.
- Calculate and pay VAT on services sold in Egypt to the office by a non-resident, unregistered supplier within thirty days of the sale.
The firm's Tax Department reviews the activity of representative offices against the permanent establishment rules, registers them with the Egyptian Tax Authority, and handles the tax on their staff salaries and on the services they buy from abroad.
Mahmoud Nassef, Founder Partner
Chartered Accountant, Ministry of Finance, Egypt
Member, Egyptian Society of Accountants & Auditors
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.