15 October 2020 Egypt amends income tax and stamp duty law provisions On 29 September 2020, the Egyptian Cabinet issued Law No. 199 of 2020 in the Official Gazette, which amends certain provisions of the Income Tax Law No. 91 of 2005 and Stamp Tax Law No. 111 of 1980 with respect to:
Net profit after tax realized by nonresident corporations through a permanent establishment (PE) in Egypt is subject to 10% tax. The law deems the net profit to be distributed, and subject to tax, within 60 days from the PE's financial year end. The party executing the transaction should withhold the tax and remit it to the Central Department for Withholding and Collection on the designated tax form within five working days from the beginning of the month following the month in which the tax was collected. The law sets new conditions for the treatment of the capital gains tax on listed securities, that had been suspended until 17 May 2020. The law retains the current tax treatment on capital gains realized from the disposition of unlisted securities, which are taxed at the rate of 22.5%. Capital gains are calculated based on the difference between the selling, exchange price or any other form of consideration from the disposition of securities, after deducting any brokerage fees, and the acquisition cost of those securities. Capital gains realized from the disposal of securities listed on the Egyptian Stock Exchange by individuals and corporations will be subject to 10% tax. However, the law suspends the application of the tax until the end of December 2021 (i.e., gains will only become taxable if realized from January 2022). Stamp duty will continue to apply to the sale of securities during the suspension period (i.e., until the end of December 2021). Following the suspension period, stamp duty will no longer apply on the sale of securities by residents. Capital gains realized from the disposal of securities listed on the Egyptian Stock Exchange or from the disposal of Treasury bills by nonresident individuals and corporation are exempt from tax. Capital gains tax on residents and nonresident individuals and corporations from the disposal of listed securities during the period from 17 May 2020 until 29 September 2020, when the new law was enacted, is waived. The executing bodies should notify the tax authority through a detailed statement of the total proceeds from the disposal of securities for each taxpayer on the designated form within five working days following the end of the year. In addition to the reporting requirement with the tax authority, the executing parties should notify the Central Department for Withholding and Collection regarding the transaction no later than the end of January of each year. Tax will be payable based on net gains for the year. The taxpayer will need to file a designated form that will be prescribed in the executive regulations. Before the amendment, stamp duty of 0.15% applied to both the buyer and seller (i.e., 0.3% in aggregate) on the gross proceeds from the sale of securities representing less than 33% of the total entity's capital, whether the securities were Egyptian or foreign, listed or unlisted.
The stamp duty levied at the rate of 0.3% on the buyer and seller (i.e., 0.6% in aggregate) on the gross proceeds from the disposition of more than 33% of the total entity's capital remains unchanged. The law states that "stamp duty shall not apply on the sale and purchase of securities which occur on the same day." The executing bodies should collect the tax and remit it to the competent tax authority on the designated tax form within five days from the beginning of the month following the one in which the transaction was carried out. If the tax is not remitted, the executing bodies, buyer and seller are collectively responsible for the tax and any associated penalty.
Document ID: 2020-2476 |
