Egypt's Withholding Tax on Payments to Non-Residents: Article 56

Executive summary

• Article 56 of Income Tax Law No. 91 of 2005 imposes a 20% tax, with no deduction of costs, on interest, royalties, service fees and fees for the activity of sportspeople and artists paid from Egypt to non-residents.
• The payer withholds it and remits it on the first working day after the deduction, on Form No. 11 "مستقطعة", even if it operates in a free zone or a special economic zone.
• Interest on loans obtained by the government and public juristic persons from sources outside Egypt is exempt; Law No. 30 of 2023 withdrew the exemption for companies' loans, and Law No. 151 of 2026 added a narrower one limited to financing national infrastructure projects.
• A treaty rate for interest and royalties is not applied at payment: 20% is withheld and the non-resident then claims the difference back from the Egyptian Tax Authority (the ETA).
• A payer who fails to withhold or remit is pursued by the ETA itself for the tax and the late-payment charge, which is 22.50% for 2026 and may not exceed the tax itself.

Who withholds, and on what payments

Article 56 provides that amounts paid "by the owners of individual establishments, resident juristic persons in Egypt and non-resident bodies with a permanent establishment in Egypt, to non-residents in Egypt" are "subject to tax at the rate of 20%... without any deduction of costs". The tax is therefore charged on the gross amount. A non-resident is a person who meets none of the cases of residence in article 2, which include, for an individual, a permanent home in Egypt or a stay of more than 183 days within twelve months, and for a juristic person, incorporation under Egyptian law or a main or actual centre of management in Egypt.

Four categories of payment are listed:

1. Interest — which article 71 of the executive regulations defines as everything yielded by loans, advances and debts of any kind, and by bonds and bills. 2. Royalties, without exception since Decree-Law No. 101 of 2012 removed the original exclusion for designs and know-how serving industry. 3. Service fees — excluding a permanent establishment's share of the administrative, control and supervision costs borne by its head office abroad. Article 72 of the regulations also excludes services that include transport, shipping, insurance, training, participation in exhibitions and conferences, listing on international exchanges, direct advertising and promotion, services connected with religious rites, and hotel or other accommodation. 4. Fees for the activity of a sportsperson or artist, whether paid directly or through any party.

Where the service is performed in a country with a double tax treaty with Egypt, the treaty applies, provided the payer produces documents showing that the service relates to its business and was paid for; a business whose work by its nature needs continuous services performed abroad must ask the ETA for an advance ruling on their tax treatment (article 73 of the regulations).

Exemptions on loan interest

The only exemption with no time condition is interest on loans and credit facilities obtained by the government, local administration units and other public juristic persons from sources outside Egypt.

The exemption for interest on loans to public sector, public business sector and private sector companies, which required a loan term of at least three years, was withdrawn by Law No. 30 of 2023 from 16 June 2023, continuing only for loans on which interest was already being paid before that date.

From 29 July 2026, Law No. 151 of 2026 added a narrower exemption: interest on loans and facilities obtained by these companies from unrelated lenders to finance national infrastructure projects identified by a decision of the Prime Minister, subject to two conditions together — a loan term of at least five years, and the company's contribution to such projects amounting to at least 25% of the total value of its investments.

The remittance deadline and form

The payer must withhold the tax and remit it on the first working day after the day on which it was withheld, not within 15 days after month-end as in the original text. This is the last paragraph of article 56 as replaced by Decree-Law No. 101 of 2012, in force since 1 June 2013 (article 1 of Law No. 11 of 2013). The obligation expressly covers companies and branches set up under the Special Economic Zones Law and projects under the free-zone system.

Remittance is made on Form No. 11 "مستقطعة" to the withholding tax collection department of the ETA's Central Administration for International Agreements (article 76 of the regulations as replaced by Minister of Finance Decree No. 172 of 2015, which also repealed article 77 on Forms 12 and 13).

This is a separate regime from withholding on account of tax on domestic payments (Form 41), covered in Withholding tax and Form 41 in Egypt.

Treaty relief: how a lower rate is obtained

Article 76 of the regulations requires the payer to withhold at the article 56 rate, so a treaty rate for interest and royalties is not applied at payment; instead the non-resident claims back the difference. The ETA's published services guide (second edition) describes the route: a claim for a "refund of withholding tax differences" on Form No. 1, filed by the recipient or its legal representative, with attachments that include:

• the original of its tax residence certificate, certified and legalised, and of a certificate that it is the beneficial owner of the income and that the income is unconnected with a permanent establishment in Egypt, for the refund years;
• the contracts with the Egyptian company, translated into Arabic by an accredited translation office, and evidence of its ownership of the rights generating the income;
• the Forms 11, remittance receipts and bank transfers, and the Egyptian company's balance sheets and tax returns for the refund years.

The claim is filed electronically after a simplified registration of the non-resident, or with the General Administration for International Agreements. If documents are missing, there are at most 15 days to complete them, and the ETA completes the refund within 45 days of a complete file. The six-month deadline and 90-day response period set by Minister of Finance Decree No. 771 of 2009 are no longer in the regulations.

The consequence of not withholding

The obligation to withhold and remit falls on the payer, not the non-resident. If it fails to do so, the tax and the late-payment charge are collected through an enforceable claim issued in the payer's name, without prejudice to any right of recourse it may have against the non-resident (article 45 of Unified Tax Procedures Law No. 206 of 2020).

The late-payment charge runs from the day after the remittance deadline, at the Central Bank's credit and discount rate announced on the preceding 1 January plus 2% (article 110 of the Income Tax Law): 22.50% for 2026, the rate having been 20.50% on 1 January 2026 (ETA Circular No. 1 of 2026). The charge may not exceed 100% of the tax (article 45 bis of Law No. 206 of 2020, added by Law No. 7 of 2025).

What this requires

• Identify every payment to a non-resident for interest, royalties, services or sports and artistic activity before making it, withhold 20% of the gross amount, and remit it on Form 11 "مستقطعة" on the first working day after the deduction.
• Review any internal procedure that still works to 15 days after month-end or excludes design and know-how payments from royalties; both come from the original text, which has been replaced.
• Confine the old exemption for companies' loan interest to loans on which interest was paid before 16 June 2023, and check the conditions of the new national-infrastructure exemption.
• Prepare what the non-resident's refund claim needs from the payer: the Forms 11, remittance receipts and bank transfers, and the balance sheets and tax returns for the refund years.
• Keep documents showing that a service fee relates to the business and was paid, and do not withhold on a permanent establishment's share of the administrative, control and supervision costs borne by its head office abroad.

The firm's Tax Department identifies the payments subject to this tax, computes and remits the deduction on time, and follows up treaty refund claims.

Mahmoud Nassef — Chartered Accountant (Egyptian Register), Founder Partner

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.