Egypt Approves New 10% Capital Gains Tax On Stock Market Profits

Egypt has approved the introduction of a 10 per cent capital gains tax on profits made on the stock market, the country’s Finance Minister Hany Dimian told Reuters on Thursday.

The tax is part of the first phase of income tax reforms in the country expected to bring in 10 billion Egyptian pounds ($1.40 billion), Dimian said. He said the tax will not be retroactive and will be implemented once a law is issued.

“The council of ministers agreed to impose a 10 percent tax on net capital gains that individuals make at the end of the tax year,” Dimian said. “A tax of ten percent was also imposed on cash dividends and bonus shares.”

Profits from stock market transactions are currently tax free.

Egypt has been voting this week to choose a new president. Abdel Fattah al-Sisi, the general who toppled the country’s first freely elected leader following mass protests, has taken more than 90 percent of the vote according to provisional results.

The country is keen to encourage investment but also find additional sources of revenue after more than three years of economic and political turmoil since a popular uprising ousted Hosni Mubarak in 2011.

Growth expectations for this financial year are between 2-2.5 per cent, the finance ministry has said.

To help to encourage direct investment there will be a reduction in the tax on cash dividends and bonus shares for those holding strategic investments of more than 25 percent in companies listed on the stock market, Dimian said.

“The percentage is decreased to five per cent if the participation level is more than 25 per cent, which would encourage direct investment,” he said.

Dimian said there would also be an exemption from the tax for parent or holding companies that receive dividends from their affiliates if their stake is no less than 25 per cent of the capital in those firms for at least two years.

Dimian said a 0.001 per cent stamp tax on stock market transactions will be cancelled.

He also said the new tax would not have adverse effects on foreign investment. “With regard to foreign investors there will be no change in their tax burdens because the tax they pay in Egypt will be discounted in their countries.”