Egypt: Issuance of Ministerial Decree 428 of 2021

In Detail

• The guidelines issued by Ministerial Decree 428 of 2021 indicate the sequence of the several amendments to the income tax law 91 of 2005, as well as the stamp tax law 111 of 1980 until the issuance of law 199 of 2020.
• The guidelines indicate the taxing mechanism, deadlines and tax rates for the capital gains realised from the disposal of securities and treasury bills/bonds, whether listed in the Egyptian Stock Exchange (EGX) or not.
• The guidelines also include the relevant procedures, rates and provisions to apply the stamp tax on financial securities.
• Several definitions and legal terms are embedded within the guidelines as an easy reference for taxpayers.
• The guidelines are issued in line with the Ministry of Finance's vision, encouraging transparency within the Egyptian tax community through simplifying tax procedures for taxpayers and protecting them from the legal risk of non-compliance with the applicable laws and regulations.

Key highlights 

Capital Gains Tax

• According to law 199 of 2020, the capital gains realised by a resident in Egypt (natural/juridical) from the disposal of listed securities on the Egyptian Stock Exchange (EGX) are subject to tax at the rate of 10%. However, this tax has been put on hold until the end of 2021.
• The above-mentioned suspension of capital gains tax on listed securities will end by 31 December 2021 as stipulated in the law, and the applicable tax rate shall be enforced starting 1 January 2022.
• In other words, the capital gains realised by resident taxpayers from the disposal of listed securities on the EGX shall be subject to capital gains tax at 10% starting from 1 January 2022 onwards.

Stamp Tax

• As of 1 January 2022, Egyptian tax residents shall be exempt from stamp tax on the proceeds realised from the sale of listed securities as long as the transaction is less than the acquisition threshold of 33% of the company’s shares.

Chronology of Amendments – Capital Gains Tax

The following table demonstrates the tax treatment of capital gains realised by juridical persons from the disposal of quotas and financial securities:

• The deduction of foreign tax is allowed as long as the required conditions are fulfilled in accordance with article 54.

• The corresponding costs of shares subject to the separate tax pool of 10% shall not be considered as deductible for corporate income tax purposes.

*Article 49 of the income tax law states the standard corporate income tax rate of 22.5% in addition to special corporate income tax rates for the Suez Canal, Egyptian Petroleum Authority, the Central Bank of Egypt (40%) and Oil Exploration & Production (40.55%).

The following table demonstrates the tax treatment of capital gains realised by natural persons from the disposal of quotas and financial securities:

• The deduction of foreign tax is allowed as long as the required conditions are fulfilled in accordance with article 46 bis-6.

• The corresponding costs of shares subject to the separate tax pool of 10% shall not be considered as deductible for corporate income tax purposes.

*Article 8 of the income tax law states the income tax rates for individuals (i.e. tax brackets), which shall apply according to the rates of each period.

The following table demonstrates the tax treatment of capital gains realised by juridical persons from the disposal of treasury bills and treasury bonds:

The following table demonstrates the tax treatment of capital gains realised by natural persons from the disposal of treasury bills and treasury bonds:

• The corresponding costs to the T-bonds subject to the separate tax pool of 10% shall not be considered as deductible for corporate income tax purposes.

*Article 49 of the income tax law states the standard corporate income tax rate of 22.5% in addition to special corporate income tax rates for the Suez Canal, Egyptian Petroleum Authority, the Central Bank of Egypt (40%) and Oil Exploration & Production (40.55%).

**Article 8 of the income tax law states the income tax rates for individuals (i.e. tax brackets) which shall apply according to the rates of each period.

Chronology of Amendments – Stamp Tax

The following table shows the stamp tax rates applicable to the buying and selling transactions of financial securities:

• Stamp tax is not applicable on quotas, treasury bills and treasury bonds.

• Stamp tax is not applicable on the spot transactions (i.e. executed in the same day).

• In cases where a transaction involves the sale of 33% or more of the company’s shares, the stamp tax rate should be 0.3%, applicable on both the buyer and seller.