Egypt

Law No. 30

Generally, the new Law No. 30 is designed with the aim of boosting the economy and streamlining the taxation of various items of income.

These modifications will be effective starting 16 June 2023 and are expected to be followed by the executive regulations from the Ministry of Finance in the coming months.

Post COVID-19 updates

Post the COVID-19 pandemic, updates/changes have been announced by the Egyptian government to several articles in the Egyptian income tax law derived with the intention to stimulate the economy.

Such changes mainly cover the withholding tax (WHT) imposed on the dividend distributions made by an Egyptian company, capital gains tax (CGT) realised upon disposing of Egyptian listed shares on the Egyptian Exchange (EGX), along with the stamp tax imposed, as explained below.

In addition to the above, the unified tax procedures law has been issued, which mainly covers the procedures for the filing of different taxes, registration for tax purposes, and the penalties for non-compliance, as well as other tax topics.

In addition, a decree has been published abolishing the 20% stamp tax that has been imposed on advertisements and adding a 14% value-added tax (VAT) instead.

E-invoicing system in Egypt

As part of the digital transformation for the tax government practice in Egypt and following the introduction of the e-filling mechanism, the Ministry of Finance has released Decree no. 188 of 2020 for introducing the new e-invoicing system.

In July 2021, Ministerial Decree no. 1206 of 2021 was issued obligating all governmental bodies not to accept any paper invoices from any of their suppliers as of 1 October 2021. Therefore, any company dealing with any governmental body must apply the e-invoicing system before that date.

As of 1 April 2023, paper invoices will not be considered in proving costs or expenses when submitting tax returns for income tax, as well as when deducting or refunding VAT, and only electronic invoices will be considered.

Taxpayers should support their expenses and costs with electronic invoices and electronic receipts to be considered deductible costs from a corporate tax perspective.

Electronic invoices are to be applicable starting July 2023, and electronic receipts starting January 2025.

Dividends distributed by a listed Egyptian company

• A flat rate of 5% WHT is to be imposed on dividend distributions from shares listed on the EGX, whether to resident or non-resident shareholders.
• Please note that the company’s shares should be registered and also traded on the EGX in order to be considered as listed shares.

Dividends distributed by a non-listed Egyptian company

• A flat rate of 10% WHT is to be imposed on dividend distributions from an Egyptian unlisted company, whether to resident or non-resident shareholders.

Dividends distributed between resident entities

• Reduction of tax leakage on multi-layered structures in Egypt for residents through a dividend incentive.

CGT imposed on the gains realised from the disposal of shares/securities listed on the EGX

• Capital gains realised by resident shareholders should be subject to CGT at the rate of 10%.
• On the other hand, capital gains realised by non-resident shareholders should permanently be exempt from CGT, including the T-bonds.

If the shares were offered on the EGX for the first time (IPO):

• Within two years of the newly amended tax law issuance date (i.e. before 15 June 2025), 50% of the realised capital gains shall not be subject to tax.
• After two years of the newly amended tax law issuance date (i.e. after 15 June 2025), only 25% of the capital gains would not be subject to tax.

In case additional tranches were offered after the issuance date of the newly amended tax law (i.e. 15 June 2023), 25% of the realised capital gains shall not be subject to tax upon fulfilment of certain conditions.

EGX trading incentives:

• Additional cost (capped by 0.5% of both selling and buying transactions) would be allowed as a deductible cost, thus decreasing gains subject to tax on capital gains.
• Waiving the tax on capital gains on listed shares from January 2022 till the newly amended tax law’s effective date on 16 June 2023.

Stamp tax imposed on the proceeds realised upon disposing of shares/securities listed on the EGX

• Resident investors trading in or holding shares listed on the EGX (i.e. whether buyers or sellers) should be exempt from stamp tax starting 1 January 2022 (abolishing the 0.05% that has been applied on the transactions involving less than 33% of the shares).
• As for non-resident investors, the stamp tax should be 0.125% for transactions involving less than 33% of the shares.
• In addition, spot EGX transactions should be totally exempt from stamp tax.
• T-bonds are not subject to stamp tax.

Stamp tax imposed on the proceeds realised upon disposing of unlisted shares/securities 

• Resident investors trading in or holding shares unlisted on the EGX should be subject to a 0.05% stamp tax on the total proceeds realised without deducting any costs (for transactions involving less than 33%). 
• As for non-resident investors, the stamp tax should be 0.125% imposed on the total proceeds realised upon disposing of unlisted shares (for transactions involving less than 33%).
• T-bills are not subject to stamp tax.

• T-bonds are not subject to stamp tax.

Returns received from funds

The newly amended tax law treatment of the gains/returns received from eligible funds by juridical persons will be subject to a flat tax rate as follows:

• Juridical persons: 15%

The relevant investment cost related to the aforementioned gains and returns will be considered non-deductible expenses.

The executive regulations of this law shall determine the calculation methodology of the relevant costs.

This is to be applicable for financial years (FYs) ending after 15 June 2023.