Permanent Establishment in Egypt: Triggers and the 60-Day Rule
When is foreign work in Egypt a permanent establishment? A fixed place, a site or services over 90 days, or a dependent agent. Profits are deemed distributed within 60 days at 10%.
Executive summary
- A permanent establishment is "every fixed place of business through which all or part of the business of the enterprises of a person not resident in Egypt is carried on" (article 4 of Income Tax Law 91 of 2005, as replaced by Law 30 of 2023).
- It includes a building or installation site and services furnished through employees, where either lasts more than 90 days in any 12-month period, and a person who concludes the enterprise's contracts or habitually plays the principal role leading to them.
- The profits a non-resident legal person makes through a permanent establishment are taxed at the general rate of 22.5% and are deemed distributed within 60 days of the establishment's financial year-end, attracting 10% whether or not anything is remitted (articles 49 and 56 bis).
- Where a double tax treaty applies, its definition decides; under the treaty with the United Kingdom a building site must last more than six months.
- Registration is due within 30 days of starting the activity (article 25 of Unified Tax Procedures Law 206 of 2020).
A fixed place, and what is excluded
Law 30 of 2023 replaced article 4 and added article 4 bis; it has applied since 16 June 2023, and Law 151 of 2026 left both untouched. Article 4 lists among fixed places a place of management, a branch, an office, a factory, a workshop, a mine, oil field or quarry, a farm, and premises used as sales outlets.
Article 4 bis excludes a place used only for storage, display, purchasing or collecting information, or for any other activity "of a preparatory or auxiliary character" for the enterprise. The exclusion falls away if the enterprise or a closely related enterprise has a permanent establishment in Egypt, or if their combined activity is not preparatory or auxiliary and forms complementary functions of a cohesive business operation. Enterprises are closely related in any event where one holds, directly or indirectly, more than 50% of the shares, voting rights or ownership rights.
A representative office confined to preparatory or auxiliary work therefore falls outside the definition; once it goes further it is the "office" that article 4 names. The formalities are covered in Branch or Representative Office in Egypt.
Sites, services and agents
Article 4 lists among the forms of permanent establishment a building, construction, installation or assembly site and the supervisory activities connected with it, provided it lasts in Egypt "for a period or periods exceeding in aggregate ninety days within any twelve-month period". Periods worked at the same site by closely related enterprises are added.
The following are treated as permanent establishments even without a fixed place:
- Services, including consultancy, furnished through employees or other personnel engaged by the enterprise, where the services continue for the same or a connected project for the same period.
- A person acting for the enterprise who has authority to conclude contracts in its name, unless the activity is limited to purchasing goods or merchandise for the enterprise, or who habitually plays "the principal role leading to the conclusion of contracts that are routinely concluded without material modification by the enterprise".
A person acting exclusively or almost exclusively for closely related enterprises is not an independent agent.
Which text applies: the date of the event
These periods were not in the original law. Article 4 as enacted in 2005 counted "a building site or construction, assembly or installation project, or supervisory activities connected with any of them" as a permanent establishment without any minimum period, had no services rule, and limited the dependent agent to a person with "authority to conclude contracts in the name of the enterprise and to approve them". Events before 16 June 2023 are measured against that original text: a two-month site in 2022 was a permanent establishment under domestic law.
Tax on the profits and the 60-day rule
Tax applies to "non-resident legal persons in respect of the profits they realise through a permanent establishment in Egypt" (article 47), at 22.5% of annual net profits (article 49, first paragraph as replaced by Decree-Law 96 of 2015), save for special rates in its second paragraph.
Head-office administrative, control and supervision expenses charged to the establishment are allowed only up to 10% of its net taxable profit, excluding royalties, interest, commissions and direct wages, and only against a certified and notarised certificate from the head office's auditor (article 56, item 3, and article 74 of the Executive Regulations). That share is not a service fee subject to withholding; payments the establishment makes to non-residents are covered in Egypt's Withholding Tax on Payments to Non-Residents.
Article 56 bis, as replaced by Law 151 of 2026, subjects these profits to the 10% tax on distributions and then provides:
"The profits of non-resident legal persons realised through a permanent establishment in Egypt are deemed distributed within sixty days from the date of the close of the financial year of the permanent establishment".
The tax does not wait for a remittance to head office, and the article sets no separate payment date for a permanent establishment.
| Base | Rate | Provision |
|---|---|---|
| Profits of the permanent establishment | 22.5% of annual net profits | Articles 47 and 49 |
| Deemed distribution | 10%, no costs deducted | Article 56 bis |
These are the standard-regime rates. A permanent establishment that meets the conditions of the simplified tax regime and registers under it pays different, reduced rates — see the rates and conditions in Egypt's simplified tax regime.
The rule is not new: the same sentence appears in the article as replaced by Decree-Law 96 of 2015 and then by Laws 199 of 2020 and 30 of 2023, at the same rate in the 2020 and 2023 texts, so a distribution deemed made before or after 29 July 2026 bears the same rate. The other changes made by Law 151 are set out in Egypt income tax amendments 2026.
The treaty: the United Kingdom as an example
If the enterprise is resident in a country with which Egypt has a double tax treaty, the treaty decides Egypt's right to tax. Article 7(1) of the treaty with the United Kingdom provides that "The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein", and the permanent establishment is the one defined in its article 5:
| Situation | Income Tax Law | UK treaty |
|---|---|---|
| Building or assembly site | More than 90 days in any 12 months | More than six months (article 5(2)) |
| Services through employees | Permanent establishment after 90 days | No equivalent rule in article 5 |
| Dependent agent | Authority to conclude contracts, or the principal role leading to them | Authority to conclude contracts in the enterprise's name, habitually exercised (article 5(4)) |
| Preparatory or auxiliary activities | Excluded, with an anti-fragmentation rule | Excluded, with the anti-fragmentation rule of MLI article 13(4) |
A UK-resident company whose staff work for a client in Egypt for four months may therefore have a permanent establishment under domestic law but not under the treaty, unless it has a fixed place or an agent in Egypt within the treaty's meaning.
The table follows the "synthesised text" that the Egyptian Tax Authority (ETA) publishes for the treaty as modified by the Multilateral Convention (MLI). It is a guiding text in which the English version prevails, and the modifications apply, for taxes other than withholding taxes, to taxable periods beginning on or after 1 July 2021. The ETA publishes synthesised texts for the treaties with 26 countries on a dedicated page and others among the bilateral treaties, such as Austria's, so both pages should be checked before relying on any original text. How treaties affect the tax on deemed distributions is outside this piece.
Staff working from Egypt for a foreign company
One way a permanent establishment arises in practice without anyone intending it is through staff working from Egypt for a company abroad. Staff serving its clients in Egypt for more than 90 days may bring it within the services rule; staff who conclude its contracts or habitually play the principal role leading to them create a permanent establishment even when working from home; staff limited to preparatory or auxiliary activity, with no role in concluding contracts, do not (article 4 bis).
If management itself moves to Egypt, the company may become resident: a legal person is resident where "its main or effective centre of management is in Egypt" (article 2), and effective management exists where at least two of four conditions are met, among them that day-to-day management decisions are taken, or board meetings are held, in Egypt (article 3 of the Executive Regulations). Founders running a foreign holding company from Egypt are outside this piece; the individual's own position is covered in Working from Egypt for a foreign company: employee or contractor?.
What this requires
- List every activity in Egypt (premises, sites, staff, agents) and test it against articles 4 and 4 bis, then against the treaty, using its synthesised text where one exists.
- Count site and service periods over any 12-month period, adding those of closely related enterprises at the same site.
- Identify who concludes contracts in Egypt and who plays the principal role leading to them.
- Register within 30 days of starting, and obtain the head-office auditor's certificate for expenses charged.
- Compute the 10% tax on the profits deemed distributed within the 60 days after the financial year-end, and plan the cash for it.
- Measure events before 16 June 2023 against the original article 4.
The firm's Tax Department analyses foreign companies' activities in Egypt to establish whether they have a permanent establishment under the law and any applicable treaty, registers them, and computes the tax on their profits and on their deemed distributions.
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.