Review Example

An employee working at governmental sector received the

following amounts during 2013:

- Monthly basic salary L.E. 500 including L.E. 50 special raise.

- L.E. 100 monthly, nature of work allowance.
- L.E. 400 monthly, reception allowance.
- L.E. 600 monthly, production incentives.
- L.E. 20 monthly, social raise.
- L.E. 330 monthly, for actual travel expenses.
-

He paid L.E. 150 monthly as life insurance premiums in favor of his

wife.

Required:

Calculate the tax due.

 Solution

Basic salary = 500 × 12 6,000

Add: Variable wages:

Nature of work allowance (100 × 12) = 1,200
Reception allowance (400 × 12) = 4,800
Production incentives (600 × 12) = 7,200
Social raise (20 × 12) = 240
_________ 13,440
_______
= Total revenues 19,440

Deduct:
1. Exempted revenues by special laws:
 Special raise (50 × 12) = 600
 Social raise = 240 (840)
2. Exempted amounts by Article no.13:
 Personal exemptions (4,000)
 Social insurance:
For basic salary = 6,000 × 14% = 840
For variable costs = 6,000 × 11% = 660 (1,500)
_______
= Net revenues 13,100

Deduct: Life insurance:

Amount paid (150 × 12) = 1,800
(15%x13,100) = 1,965 or 3,000
Deduct: Amount paid (1,800)
_______
Deduct: Stamp tax:
Monthly net revenues = 13,100 ÷ 12 = 1,092
→Stamp tax = (1,092 – 50) = 914 × 0.75% = 7.815
Deduct: Annual tax = 7.815 × 12 (94)
_______
= Net income 11,206

Deduct: Personal deductions (free slice) (5,000)

_______
= Taxable income 6,206

 Annual tax due = L.E. 620 , Monthly tax due = L.E. 51.67
 Assignment No. 5

An employee in a private sector company received the following amounts

every month during 2013:

- Basic salary L.E. 800

- Special raise L.E. 450
- Production incentives L.E. 300
- Nature of work allowance L.E. 200
- Reception allowance L.E. 400
- Overtime L.E. 100

Other data:

 The employee paid L.E. 150 each month as a subscription in special

insurance fund, and L.E. 1,500 during the year as life insurance
premiums.

 On July 1, 2013, the employee earned a regular raise, L.E. 200 and the
overtime increased by L.E. 100 per month.

 At the end of the year, the employee received a bonus for L.E. 2,000
and profits share according to the law for L.E. 2,500

Required:

 Calculate the taxes deducted from the monthly salary of the previous
employee.
 Calculate the tax due on the bonus.
 Prepare the reconciliation statement for the taxes due at the end of
the year.