Changing up how solidarity contributions are calculated: The Finance Ministry plans to introduce changes into how solidarity contributions are calculated and paid out, two government sources told EnterpriseAM yesterday.

The contribution will no longer be paid out on its own, instead it will be integrated into the new unified additional tax on net income — yet to be finalized — that the companies will pay alongside the annual income tax. The Finance Ministry will be responsible for distributing the contribution to the relevant authorities.

REMEMBER- The government is planning to replace the myriad and often confusing set of fees faced by investors with a single unified additional tax on net income. The proposed tax will come at a rate of 3-5%, which will be collected with the investor’s tax filing.

The reasons behind changing the mechanism: Firms are currently facing two main issues with the solidarity contribution — contribution is calculated based on revenues, not net income, which increases its value and negatively affects companies' liquidity and paying it is a prerequisite for participating in government tenders and auctions, which forces companies to pay it.

Gov’t to address these issues: Finance Minister Ahmed Kouchouk promised investors to resolve these issues before the next tax season, our sources said. The ministry will shut down the separate electronic procedures on the Egyptian Tax Authority’s system for paying the solidarity contribution.

As things stand: The solidarity contribution is currently calculated based on gross revenues. Shifting the calculation to net profit requires legislative changes, which fall under the purview of the Investment Ministry and the Universal Health Ins. Authority, Egyptian Tax Authority head Rasha Abdel Aal told us earlier this year. Once these changes are made, we can adjust the mechanism in time for the next tax filing season, Abdel Aal noted at the time.

ALSO- Firms will see a significant reduction in the fee they have to pay to the Manpower Ministry’s training fund — the fee will be slashed to 0.25% of their post-tax net income from the current 1%. The fee will be eliminated entirely for the firms that can prove they provide accredited training and qualification programs for their staff, the sources added.

Need a refresher? The cabinet agreed last October to change how the solidarity contribution is calculated. The amendments included a 0.25% healthcare tithe to fund the universal healthcare system calculated based on companies’ net income, instead of their total revenues. However, this was met with concerns from the Universal Health Ins. Authority.

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