New amendments of Stamp Tax on Sale of Shares, Capital Gain Tax on Sale of Shares or Quotas and Dividends Tax

New enforced Law No. 199 for the year 2020 has been published in the Official Gazette to include the following:

Amendments of Stamp Tax on Sale of Shares

As per Article 83 BIS of Stamp Tax law 111/1983, stamp tax on sale of all types of shares whether it is Egyptian or foreign, registered or nonregistered in the Egyptian stock exchange with no deduction of cost as follows:

  • 1.25 per thousand will be borne by the non-resident seller, and 1.25 per thousand will be borne by the non-resident buyer.
  • 0.5 per thousand will be borne by the resident seller, and 0.5 per thousand will be borne by the resident buyer.
  • The above-mentioned stamp tax is not applied for trading transactions made within the same day (sell and buy in the same day).

(The above is after it was 1.5 per thousand on seller and 1.5 per thousand on buyer).

  • Additional regulation to the above, is to cancel the application of stamp tax on sale of shares registered in the Egyptian Stock Exchange Market starting from first day of 2022 (after the end of 2021 in which capital gain for residents inside Egyptian Stock Market is delayed).

Amendments of Dividends Tax Related to Individuals:

Dividends pool for Natural Person according to Article 46 (BIS 1) shall be determined as per concerned authority for distribution. 

The above is after it was only limited for natural person who has no activity.

As per Article 46 (BIS 2), Dividends tax rate for natural person derived from Egyptian source is now subject to 10% in all cases with no deduction of cost. This rate will be 5% in case it is derived from a company registered in Egyptian Stock Exchange Market.

The above amendments are after it was 10% for ownership (Shareholding Percentage) lower than 25% and 5% for ownership (Shareholding Percentage) equal to or more than 25%.

Amendments of The Reporting Mechanism Needed from The Parties Applying the Transactions for Capital Gain on Income Tax law 91/2005 as follows:

As per Article 46 (BIS 5), for those parties applying the transactions related to capital gain on sale of shares for natural persons, it is to report the summary of the transactions made for individuals. The Capital Gain shall be calculated based on the net annual taxable period results by January of each year. The Capital Gain is to be reached after deducting the transaction acquisition cost and brokerage value from the sale or proceed value.

Amendments on Dividends Tax Rate for Corporations, Branches or Partnerships – Article 56 (BIS)

Dividends tax rate for corporations, branches or partnerships including special economic zone companies derived from Egyptian source are now subject to 10% in all cases with no deduction of cost. This rate will be 5% in case it is derived from a company registered in Egyptian Stock Exchange. 

The above amendments are after it was 10% for ownership (Shareholding Percentage) lower than 25% and 5% for ownership (Shareholding Percentage) equal to or more than 25%.

In addition, Dividends and its cost received by Egyptian juridical persons from another Egyptian juridical persons shall be eliminated from corporate taxable profits based on the executive regulation of this law (not issued yet).

Amendments with regards to Capital Gain Tax on Sale of Shares Registered in the Egyptian Stock Exchange:

As per article No. 46 (BIS) 3. The following items were amended: 

Capital gain realized by residents from sale of share registered in Egyptian Stock Exchange will be subject to 10% capital gain tax.

Capital gain realized by non-residents from sale of shares registered in the Egyptian Stock Exchange is not subject to capital gain tax. In addition, treasury bills owned by non-resident companies or individuals will not be subject to capital gain tax.

The above amendments is after it was subject to 10% for any shares registered in the Egyptian Stock Exchange, but it was frozen until May 17, 2020.

Accordingly, period from May 17, 2020 until the issuance of this law is considered not to be subject to capital gain tax on sale of shares for capital gain realized by residents or non-residents.

Additional regulation to the above, is to delay the application of capital gain tax realized by resident individuals or juridical persons on sale of shares except governmental bonds till the end of 2021. 

Adding Item No. 13 of Article No. 50:

Capital gains from settlements on the liabilities of public sector companies or companies in which the government owns at least 51% of its capital. These companies' debt settlements with banks and other creditors, in exchange for the transfer of ownership of portion or all their lands, in which case the exemption should be within the proportion of their government's capital holdings. This will be applied for period before the issuance of this amendment with no ability to refund any paid tax on profits. 

Responsibility and Commitment:

Andersen Egypt's tax team has prepared this summarized tax alert to introduce the new law to amend the Stamp Tax on Sale of shares, Capital Gain Tax on Sale of Shares or Quotas and Dividends Tax. Efforts have been combined to produce this alert with clear and accurate content. However, this report aims only to spread general information and should not be treated as a legal document or a document that can be used for decision-making, or for issuing specialized consultations. Please contact Andersen Egypt for tailor-made solutions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.