Chapter Two

Tax On revenues Of
Non- Commercial Professions

 Taxable Revenues.

 Tax Bracket Determination.

 Tax Exemptions.

 General Example.

 Exercises.

1
Introduction:
The legislator dealt with revenues of the non- commercial
professions which are subjected to the tax on natural person's income in
Book Two part 4 of law 91/2005 starting from Article (32) and ending up
with Article 36.

Taxable Revenues:
Article No. (32) of the law stipulates that:
Tax applies to net profits of free professions and other non-
commercial professions, practised by tax- payer independently. The basis
and fundamental element of revenue is that resulting from the practice of
a profession or an activity in Egypt.
The tax also applies to income obtained by intellectual property
rights holders from sale or investment in their rights. The provision of
this Article applies also to any other revenues resulting from any
profession or activity not stipulated upon in Article (6) of this law.
From the context of Article (32) of the law it ensues that
professions whose revenues are subjected to taxation are:
1- Free professions.
2- Non- Commercial professions.
3- Professions and the activities not stipulated in article (6) of this
law.
By the term "free professions" it is meant those professions which
are related to services rendered by a person to others independently.
Performance of these professions requires special academic or technical
skills, or based on mental activity. Capital is considered a secondary
element when practicing them. Examples of these professions are the
lawyer, the accountant, doctor and artist.

2
 As for the non- commercial professions, they stand out as being
those professions in which capital does not solely prevail. These
professions are neither commercial, industrial, agricultural or free- lance
professions, for they are those professions about which there has been no
explicit context in the commercial law, and whose revenue resulting
fundamentally from the work element, and which are practised by the tax-
payer independently, whereas commercial professions are characterized
by the capital being a basic and fundamental element in realizing profit.

As for the professions and activities not stipulated in article. (6) of

this law, they stand out as being those professions and activities out of
which tax- payer earn revenues other than those resulting from capitals,
commercial and industrial activities, salaries and the like, non-
commercial professions, and the revenues of real estate wealth.
It could be said her that a profession is a work practised by a
person repeatedly, on a professional basis with the aim of realizing profit.
The practice of a profession requires this person to prepare himself both
academically and practically. As for the activity, it means employing any
effort which would not go up to professionalism until it becomes a craft
or a profession, while not coming close to being a casual work and a
craftsmanship. An example of that is the employee who exploits his free
time in trading in stock, goods or cars and whose revenue is resulting
from his said work is considered as being an activity which would be
classified under the revenues of the non- commercial professions. The
Decree of the Minster of Finance No. 549/2005 determined non-
commercial professions as follows:

Legal profession- Medicine- Art- Journalism- Writing and

Authorship of scientific and literary works inclusive of delivering
technical, Scientific and literary lectures. Accounting and auditing-

3
Expertise- Translation- Religious reading and recitals. Drawing,
photographing, Engraving and handwriting. Singing, chanting, music-
playing writing artistic works and other cinema graphic television and
theatre professions- Fashion defiles- Custom clearing- typing by piece for
whoever practices this activity by himself.
To subject the revenues and activities of a non- commercial nature
to the tax, the following terms and conditions must be fulfilled:

1- Independent practice of the profession or the activity:

By independence in practicing the profession, it is meant that the
party in whose name the tax will be assessed and fixed practise his
professional activity for his own personal account. This means that the
results of practising profession or an activity in terms of profit of loss are
added to the elements of his financial obligation, on basis that he is the
bearer of the risks of his profession.
In application of this term and condition, what the doctor earns out
of performing operations in a certain hospital without his being attached
to it as an employee is considered as revenues of non- commercial
professions. But if he is attached to the service of the hospital in which he
performs operations, then his revenue is considered as salaries and the
like. Another instance in which a revenue is considered amongst revenues
of non- commercial professions is what trainee lawyers earn as long as
they are not connected with a lawyer in whose office they are being
trained on an employer / employee relation ship basis. Yet, if this
relationship is realized, whatever remuneration they get therefrom is
considered as salaries and the like.

2 - The profession or the activity must be based fundamentally, on

work element.

4
 The legislator preconditioned that work must be the fundamental
element in the practice of a profession or an activity included in the
revenues of non- commercial professions. This condition is considered
amongst the terms and conditions which characterize free- lance
professions and other activities. Yet it is observed that with the
technological development of some professions such as deontology, and
x- rays, the element of capital represents a rather important weight in
these professions, in the form of instruments and tools used by the doctor.
However, technical experience is still the basis in using these instruments
and tools efficiently.

3 - Practice of the profession or the activity in Egypt :

The legislator preconditioned that for subjecting of revenues of
non- commercial professions to taxation, they must result from the
practice of the profession or the activity in Egypt. The practice of the
profession in Egypt is not connected with the nationality of the performer
whether he is Egyptian or a foreigner. However, if a doctor is called over
from abroad (whether he is an Egyptian or a foreigner) to perform
surgical operations in Egypt, or to provide medical consultations therein,
then what he receives as a result of that must be subjected to tax.
In addition, what is also subjected to tax are net profits resulting
from practicing the profession overseas regardless of the nationality of
the performer, if the head office or the permanent office for the practice
of the profession is in Egypt. For the doctor who has a clinic or a hospital
in Egypt, where he practices his medical profession, then he is called to
perform operations outside Egypt or to provide medical consultation,
whatever he may receive overseas as a result of that will be subjected to
taxation, in addition to what profits he has realized from practicing the
profession in Egypt.

5
4- Professionalism of the profession or the activity:
It is a precondition for the subjecting of profits resulting from
practicing a non- commercial profession to taxation that its performer
would be professional therein, meaning that it is considered as a source of
a living for him. It is known that professionalism consists of two
cornerstones.
A material cornerstone: based on the practice of the profession or
the activity repeatedly and regularly, and a moral cornerstone:
represented in the intention of realizing profit. These two cornerstone of
facts are closely connected, as the one usually evidence the presence and
existence of the other.
This precondition may explain why exemption has been granted to
charitable societies which are non- profits within the limits of their
sportive, social or scientific activity. For this is one of the cases in which
the intention of making profits by the performer of such activity is non-
existent.