news & events
Capital Gains Tax on Trading Listed Securities
Taxing capital gains generated from trading listed securities on the Egyptian Exchange (“CGT”) raised several difficulties concerning the subject and timing of its entry into force. The CGT, organized under the income tax law No. 91 of 2005 (the “Income Tax Law”), has been subject to consecutive amendments of late. This article examines Law No. 199 of 2020 amending the Income Tax Law (the “Amendment”) published in the Official Gazette on 30 September 2020 and the guidelines regarding the application of the CGT issued by virtue of Ministerial Decree No. 428 of 2021 enacted by the Minister of Finance and published in the Official Gazette on 31 August 2021 (the “Guidelines”).

The Amendment was enacted as part of a package of fiscal measures adopted by the Egyptian Government to help support the economy and financial markets during the hard times of Covid-19 outbreak. The Amendment regulates many aspects of the CGT including its timing of entry into force, rules of application and the transactions subject thereto.

Scope of application of the CGT

Non-residents are not subject to the CGT for capital gains generated from trading listed securities on the Egyptian Exchange. Egyptian tax residents, however, are subject to the CGT at a rate of 10% for capital gains generated from trading listed securities on the Egyptian Exchange without the exclusion of any expenses.

The taxable capital gains are calculated on the basis of the net value of the capital gains of the portfolio of securities generated at the end of the tax period of the relevant taxpayer after the deduction of the brokerage commission.

The Amendment also confirmed that the CGT on capital gains generated by natural or juridical persons residing in Egypt from the disposal of listed securities on the Egyptian Exchange is suspended until the end of 2021. Therefore, the CGT is expected to be applicable starting from the 1st of January 2022.

The CGT Guidelines

With just four months until 2022, the Minister of Finance issued the Guidelines titled “The guidelines on the rules and instructions regarding the tax treatment for the capital gains resulting from the disposal of securities […]”. The Guidelines indicate the sequence of the several amendments that were enacted on the Income Tax Law regarding the CGT. It also indicates the taxing mechanism, relevant procedures and other details related to the CGT. We also stress on the fact that the Guidelines do not constitute a new law as they are a manual that includes instructions and explanations regarding the application of the CGT already established by the Income Tax Law.

Finally, the Minister of Finance confirmed in an interview held recently, on 20 September 2021, that the CGT will be entering into effect as planned on the first of January 2022. This declaration ended a speculation on whether the long-planned CGT would be implemented in January 2022 or postponed.

Market Reaction

The intended entry into force of the CGT starting from the first of January 2022 has caused conflicting reactions.

Mr. Sherif Samy, the former chairman of the Financial Regulatory Authority, stated that the Minister of Finance did not enact any new regulations regarding CGT and that the investors are familiar with its date of entry into force.

On the other hand, several persons adopted different opinions, one of which is Mr. Ahmed Zakaria, member of the Senate, who refused the method and the timing of application of the CGT as, according to him, this will have a considerable negative impact on the Egyptian securities’ market in general and the Egyptian Exchange in specific.
more news
New Environmental and Social Disclosures: The FRA’s Strategy to Attract Green Investors
September 27, 2021
New Environmental and Social Disclosures: The FRA’s Strategy to Attract Green Investors

Global markets are progressively shifting to more sustainable business operations driving the need to establish tools to foster this shift. Shareholders and investors are becoming increasingly concerned with diverting their investments in corporations and projects with sustainable business models. As such, environmental and social reporting tools are developed to aid shareholders and investors to assess […]

read more
Amendments to the Supreme Constitutional Court’s Law
September 27, 2021
Amendments to the Supreme Constitutional Court’s Law

In a quite unexpected and surprising move, the Egyptian government submitted a draft amendment (the “Amendment”) to the Supreme Constitutional Court’s law No. 48 of 1979 (the “SCC Law”). The purpose of the Amendment was to expand the mandate of the Supreme Constitutional Court (the “SCC”) by reviewing the constitutionality of foreign judgments and decisions […]

read more