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Monday, 12 November 2018

We break down the taxes under the Universal Healthcare Act and their timings

EXCLUSIVE- What you’re going to pay under the new Universal Healthcare Act— and when you’re going to pay it: While the state’s EGP 600 bn health insurance plan mandated under the Universal Healthcare Act will be rolled out incrementally throughout Egypt over the course of 11-13 years, the Finance Ministry is starting to collect special taxes designed to fund the scheme during the current fiscal year (2018-19). We took a deep dive into the law and spoke with friends in government to compile a list of the taxes mandated in the act and when each comes into effect

Taxes you will pay this year: Taxes ranging from a new nationwide corporate tax to industry specific taxes and fees are already in effect this fiscal year. Companies that will be impacted by the taxes will have to pay them when tax season rolls around next April or June. Notably, all of the following taxes will not be deductible from your corporate income tax.

The big one: A 0.25% tax on revenues, which the government specifies as a levy of 2.5/1000 of your top line. All companies, whether private or public and regardless of size and location, will have to pay a 0.25% tax on their sales revenues to help fund the system. The tax is payable with your next corporate tax return. This tax will apply to companies operating in Egypt’s freezones, a Finance Ministry source assured us. Freezone companies have been pushing for an exemption.

Other taxes and fees now in effect:

  • 0.5% of revenues from food and pharma companies: Companies operating in the food and pharma sectors will have to pay a tax of 0.5% on their revenues to the system. General contractors will also have to pay the 0.5% tax.
  • Healthcare industry fees: Hospitals will pay a tax of EGP 1,000 for every bed they have. Clinics and pharmacies will have to pay a set licensing fee of between EGP 1,000 and EGP 15,000.
  • Sin taxes and service fees: The law imposes fees on issuing and renewing drivers licenses ranging from EGP 20 to EGP 300. The law also sets a toll fee on highways. An EGP 0.75 sin tax all cigarette packs sold and a 10% tax on all other tobacco products has been mandated. A 5% fee on hospital stays will also be imposed. All of these levies will go directly into funding for the healthcare system.

Mandatory premiums will be paid as the system is rolled out: The premiums that employers and employees have to pay to be part of the system will be paid once the the health insurance scheme rolls out in a particular governorate. The bill will set premiums for employers of 4% of each employee’s monthly salary. Employees will pay premiums equivalent to 1% of their salary into the system. An employee will have to pay a premium of 3% of his or her salary to cover an unemployed spouse and 1% for each child. The state will pay EGP 200 bn to cover those exempt for paying premiums based on their income levels. The state will pay the equivalent of 5% of the standard minimum wage to cover healthcare for each person who cannot afford to pay a premium into the system. The government will decide criteria for exemption.

Who will be the fist guinea pigs paying the premiums? The Canal cities, where the system rolls out in May 2019.

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