Untitled Quiz

Study Notes

This chapter discusses taxes on commercial and industrial profits.
Conditions for imposing tax on commercial and industrial profits (TOC & IP):
- Income source: Net profit derived from self-utilization of labor and capital for gain. The taxpayer must be their own boss, not under the direction or control of someone else.
- Profit Concept: Includes any gain, benefit, profits, or increase in wealth. Not exempted under Egyptian law. Measured using the accrual basis.
Realization of Profits in Egypt:
- Taxed on profits of any Egyptian firm operating in Egypt.
- Taxed on profits of any foreign firm carrying business in Egypt.
Tax collection:
- Collection is required at the date of the tax return submitted by the taxpayer.
- The state may require advance tax payments.
- Uses a progressive tax rate.
Taxable year:
- Taxed on the net profit of a 12-month period ending on December 31, regardless of the firm's financial year.

Profits of Commercial and Industrial profits:
- Taxed on profits gained from buying goods to sell at a profit.
- Taxed on profits gained from converting raw materials to goods through manufacturing processes and selling them for profit.
Profits of Sole-Firm and Partnerships:
- Taxed on profits from sole-firms, limited partnerships, general partnerships, and corporations.
Profits of Operations of Brokerage & Commission:
- Taxed on the amount paid to individuals or companies as a commission or brokerage.
Profits of Lease of Shops & Machines:
- Taxed on profits from leasing commercial, industrial, mechanical, and electronic machines.
Profits of Disposing of Capital Assets:
Taxed on profits from the sale or disposal of capital assets (capital gains).
Profits of Ordinary Transactions in Buildings and Land:
- Taxed on profits from buying, constructing, selling, and dividing plots of land.
Total Value of Built Premises or Lands:
- Taxed on the total value received from built premises or land (not the realized profit).

Bee Breeding Firms: Profits from bee breeding are exempt from tax.
Firms of Lands Preparation for Cultivating: Profits from land preparation for cultivation are exempt for ten years from the date the land is considered productive.
Special Insurance Funds: Profits from insurance funds providing life, sickness, accident, or other benefits to members or dependents are exempt.
Established Firms Financed by Social Fund of Development: Profits of these firms are exempt for five years from the date of starting the activity.

Measurement of Taxable Profit:
- Taxable net profit (TNP) is calculated by matching taxable revenue with allowable deductions incurred.
Measurement of Taxable Revenue:
- Includes operating revenue, irregular revenue, and gains from dealing in fixed assets (capital gains).
Tax Treatment of Operating Revenues:
- Operating revenues are inflows from the entity's primary business activities.
- Taxable gross profit is calculated as sales minus the cost of goods sold (C.G.S).

Sales are the main source of operating revenue.
Revenue is considered taxable in the period the merchandise is delivered to the customer.
All sales transactions (sales, discounts, returns, and allowances) are correctly recorded and posted.

Three factors determine the cost of goods sold: -Net cost of purchases(purchase –purchase return –purchase discount) -Available for sale -Ending inventory -Cost of goods sold (CGS)

Details on adjustments to net profit for missed or incorrectly recorded items (e.g., unrecorded sales, goods incorrectly recorded as sales, goods owner used personally, traded goods for furniture).

Capital gains, subsidies, recovered bad debts, and compensations are examples of irregular revenues. They are subject to tax.
Details on treatment of capital gains.
Details on treatment of subsidies
Details on treatment of recovered bad debts.
Details on treatment of compensations