Withholding tax in Egypt: Form 41, the rates and the common errors

Withholding on account of tax (commonly called withholding tax) is a percentage that bodies designated by law deduct from what they pay to private-sector persons where the amount exceeds EGP 300, and from what they pay to non-commercial professionals where it exceeds EGP 100, and then remit on Form 41 by the end of April, July, October and January. It rests on articles 59 and 70 of the Income Tax Law issued by Law 91 of 2005 (Official Gazette, issue 23 (continued), 9 June 2005). The article 59 rates are in the table of Minister of Finance Decree 405 of 2018, issued under that article (Al-Waqa'i al-Misriyya, issue 195 continued (B), 1 September 2018, effective from publication). The 5% on the fees of non-commercial professionals is fixed by article 70 itself, not by the decree.

The rule binds the paying entity. It must withhold and remit to the Egyptian Tax Authority (the ETA), and if it does not, it must "pay those amounts to the ETA together with the related late payment charge" (article 59, second paragraph; unofficial translation). The amount does not come out of the payer's own funds but out of the supplier's entitlement. The supplier deducts it from the tax due under its return; any excess settles earlier tax liabilities, and if there are none the ETA refunds it, unless the taxpayer asks in writing for it to be applied to future liabilities (article 32 of the Unified Tax Procedures Law issued by Law 206 of 2020). Withholding is therefore not a separate tax: the supplier does not lose the amount withheld but pays it in advance, and a supplier who objects to withholding is objecting to timing, not to a cost.

Rates, thresholds and deadline

Decree 405 sets further rates for specific cases, among them the discounts, grants, commissions and incentives given by certain companies. Commission or brokerage paid to an individual outside the exercise of their profession is taxed at 20%, not withheld on account (articles 56 and 57 of Law 91).

As for the base, the validation rules the ETA has published for the e-invoicing system compute withholding on each line at its rate on the net line amount after trade discounts, without VAT.

Withholding applies to each amount above EGP 300 paid to any private-sector person as commission, brokerage, or consideration for purchases, supplies, contracting or services (article 59, first paragraph, as substituted by Law 53 of 2014, Official Gazette, issue 26 bis (A), 30 June 2014), and to each amount above EGP 100 paid to members of the non-commercial professions designated by ministerial decree (article 70). Nothing is withheld below the threshold, but the payer must still report to the ETA on Form 46 its dealings with any private-sector person that exceed EGP 300 in the quarter (article 59, third paragraph, added by Law 53 of 2014, and article 82 bis of the executive regulations of the Income Tax Law).

The amounts withheld are remitted on Form 41 (withholding and collection) by the end of April, July, October and January each year (article 82, first paragraph, of the regulations, and article 89 for the fees of non-commercial professionals, both as substituted by Minister of Finance Decree 172 of 2015, Al-Waqa'i al-Misriyya, issue 79 continued (B), 6 April 2015).

Who must withhold, and when nothing is withheld

Article 59 lists the bodies concerned, including government ministries and departments, local administration units and public authorities; public-sector and public business sector companies; capital companies; establishments and companies under the investment laws; companies and projects in free zones; partnerships whose capital exceeds EGP 50,000; branches of foreign companies; cooperative and civil associations; hospitals and hotels; professional offices and foreign representative offices; and other bodies designated by ministerial decree. The text sets no capital threshold for capital companies, unlike partnerships. Within that list, what matters is that the entity is the payer.

Nothing is withheld from insurance premiums paid to insurers (article 59, first paragraph), or from payments to a supplier within the advance payments system (article 60). The competent tax office's notice approving the supplier's application serves as a certificate to all its counterparties for one tax period; if it is not renewed, the counterparties must apply withholding automatically (article 84 of the regulations).

Law 6 of 2025 on certain tax incentives and facilities for enterprises whose annual turnover does not exceed EGP 20 million provides that the enterprises within it are "not subject ... to the withholding or advance payment system on account of tax" (article 11 of Law 6). The ETA's Executive Instructions 25 of 2025 apply this both ways: payers do not withhold from amounts paid to such an enterprise, and the enterprise need not withhold from amounts it pays. See Egypt's Simplified Tax Regime for Small Enterprises.

Three recurring errors

The first is withholding on the invoice total including VAT, while the system's equation computes it on the net. The difference builds up over the year and surfaces when the supplier reconciles.

The second is a supplier not obtaining proof of the withholding from the payer at the time of payment. Form 41 identifies the supplier by tax registration number, file number, competent tax office and nature of the transaction (article 82, second paragraph, of the regulations). So proof of the amount withheld is obtained with each payment and the supplier's details on it are checked, rather than leaving it to the year end.

The third is classifying the transaction. The rate follows the type of activity in the Decree 405 table, and one contract may combine a supply and a service. The safer course is to price each component separately in the contract and put it on its own e-invoice line with its own withholding type, since the system computes withholding line by line. We have found no provision in Law 91, its executive regulations or Decree 405 that settles a contract whose two values cannot be separated, so that case is reviewed before the first payment.

Payments to non-residents

Tax on amounts paid to persons not resident in Egypt is a separate regime under article 56 of Law 91, and those amounts include interest, royalties and service fees, with dividends under article 56 bis. The test is the payee's residence, not where the money is sent.

A double tax treaty may reduce or remove these rates, depending on its terms; for services performed in the treaty country, this is conditional on the payer submitting the documents proving that the services relate to its activity and that the fee was paid (article 73 of the regulations). Before any payment to a non-resident, the treaty between Egypt and the payee's country is reviewed, and neither the headline rate nor a reduced one is applied automatically.

What the business should do

• Set withholding in the payments system on the net before VAT, as the system computes it, not on the invoice total.
• Check both thresholds, EGP 300 and EGP 100, and record the Form 41 and Form 46 deadlines, the end of April, July, October and January, in the compliance calendar.
• Obtain proof of the amount withheld from the business with each payment, check its details on it, and reconcile it with what the business deducts in its annual return.
• Price each component separately where a contract combines a supply and a service, and invoice it on its own e-invoice line.
• Review the double tax treaty before any payment to a non-resident, and document the basis on which the rate was applied.

The firm's Tax Department prepares withholding returns, reviews the rates applied and reconciles amounts withheld, and reviews payments to non-residents against the applicable treaties.

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.