State-owned companies in Egypt: 5% of profits to the Treasury
5% of distributable profits is set aside before any reserves, and 4% where the State or public juridical persons hold over 50%, paid to the Treasury within four months of year end.
By Tax Department · 24 September 2026 · 4 min read
The State's public treasury receives 5% of the distributable net profits of companies wholly owned by the State or by public juridical persons, and 4% of those profits in companies in which they participate partially at more than 50% of the capital, deducted in full from their share. This follows from Law 154 of 2026 on the passing of a percentage of the net profits of companies owned by the State or by public juridical persons to the State's public treasury, published in the Official Gazette, issue 30 bis (A), on 28 July 2026, which applies from the day following its publication (article 2 of Law 154). It is one of seven laws in the same issue, reviewed together in Egypt's July 2026 tax package.
The obligation falls on the boards of directors of these companies, which set the percentage aside in the first case and collect it in the second, in both cases after covering carried-forward losses and before setting aside any reserves. The proceeds pass to the treasury within four months of the date the financial year closes (article 1 of Law 154).
The two cases
| Case | Rate of distributable net profits (%) | Mechanism and timing |
|---|---|---|
| Capital wholly owned by the State or by public juridical persons, whatever the legal regime governing the company | 5 | Set aside, after covering carried-forward losses and before setting aside any reserves |
| The State or public juridical persons participate partially at more than 50% of the capital | 4 | Collected, after the company's general assembly approves the financial statements, and after covering carried-forward losses and before setting aside any reserves |
The difference between setting aside and collecting is not merely verbal. In the first case the percentage comes out of the distributable net profits as a whole. In the second it is deducted in full from the share of the State or public juridical persons, not exceeding their share of those profits, so the other shareholders do not bear it.
Place in the appropriation of profits
In both cases the percentage is taken "after covering carried-forward losses and before setting aside any reserves" (unofficial translation). The legal reserve is one of those reserves, so the percentage comes before it, not after. Any profit appropriation schedule built on the usual order (covering losses, then the legal reserve, then other reserves, then distributions) has to be rebuilt with the percentage in its new position. We consider that this also affects how the appropriation is presented in the statement of changes in equity.
In our view, on the apparent meaning of the words, the legal reserve is then computed on what remains after the percentage is taken. The point is unsettled: no express provision or published judgment resolves it. Law 154 does not deal with the legal reserve's base.
Nature and deadline
The law describes the percentage in both cases as "tax revenue", whose proceeds pass to the State's public treasury in support of its resources within four months of the date the financial year closes. In the second case, however, collection follows the approval of the financial statements by the company's general assembly. In our view, the date the assembly meets therefore becomes part of meeting the deadline rather than a separate procedural matter.
Two exclusions
The first is in the opening words of article 1: "without prejudice to companies established in implementation of international agreements".
The second is a Cabinet decision, upon the proposal of the Minister of Finance, by which certain companies may be exempted for a temporary period from the application of the law for social or economic necessities required by the public interest (article 1, third paragraph, of Law 154).
What we recommend
- Rebuild the profit appropriation schedule with the percentage after covering carried-forward losses and before the legal reserve, and review the legal reserve base in that light.
- Determine which case applies: wholly owned (5%, set aside) or a holding by the State or public juridical persons of over 50% (4%, collected from their share and not exceeding it).
- In partially held companies, set the timing of the general assembly so that collection and remittance can be made within four months of the financial year end.
- Review presentation and disclosure in the financial statements of a percentage the law describes as tax revenue and which is taken out of distributable net profits.
- For companies established under international agreements: document the basis on which the law does not apply.
The firm's Tax Department reviews a company's position under this law and its effect on the order of profit appropriation and on the financial statements.
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
Partner profile · Book a consultation
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.