Capital Gains Tax in Egypt: Taxable Profits

Egypt has introduced a capital gains tax in Egypt on profits from the sale of securities, including stocks and bonds. These changes, primarily encapsulated within Law No. 199 of 2020, adjust the Income Tax Law and the Stamp Tax Law to include specific provisions regarding the taxation of securities and treasury bills, whether they are listed or unlisted on the Egyptian Stock Exchange (EGX). This article aims to make clear the concept and calculation of capital gains tax in Egypt, according to the most recent amendments to Egyptian Income Tax Law 91 of 2005.

Understanding Capital Gains

Capital gains, as defined by the updated legislation, is the net profit realized from a securities portfolio at the end of a given tax year. This profit is calculated by subtracting the acquisition cost and brokerage commissions from the disposing price of securities.

Calculation of Capital Gains or Losses

The net capital gains, which are taxable, are calculated as follows:

Selling or Disposing Price – Acquisition Cost – Brokerage Commission = Net Capital Gain .

For bonds and treasury bills, the capital gain is the difference between the selling and purchase price, minus the total value of the yield due for the period they were held. In instances of capital losses, these can be carried forward for up to three years, specifically for transactions in listed securities.

Tax Treatment for Securities and Treasury Bills

For Residents:

• Individuals and Companies: Profits from stock transactions must be included in the mandatory annual tax returns. Income tax rates for non-listed stocks follow Article 8 for individuals and Article 49 for companies. Meanwhile, EGX stocks are taxed at a rate of 10%.

For Non-Residents:

• They are exempt from capital gains tax on listed securities transactions, with specific guidelines for unlisted securities. Moreover, non-residents may benefit from international tax treaties regarding capital gains transfers.

Obligation to Register

Traders in the stock market are required to open tax accounts due to the implementation of the capital gains tax. Moreover, transaction organizers must notify the tax authority of these transactions by the end of January each year, using forms 43-45.

Conclusion

With Law No. 199 of 2020, Egypt introduced a capital gains tax on the sale of stocks and bonds, aiming to regulate the taxation of these transactions more effectively. For Egyptian residents, including both individuals and corporations, profits from such sales are now taxable. The tax calculation considers the sale price, acquisition cost, and related financial fees. This legislation not only aligns Egypt with international tax practices but also ensures a more structured approach to taxation within the financial market. Investors are encouraged to familiarize themselves with these changes to optimize their tax obligations and benefits.

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