Proposed Bill Amending Provisions of Income Tax Law

On 16th November 2022, the Egyptian state submitted a draft bill amending certain provisions of Income Tax Law No. 91 of 2005.

The aforementioned bill proposes a distribution of the tax burden according to income levels, issuing multiple tax exemptions and incentives, the most notable of which are as follows:

• Redistributing the tax burden according to socioeconomic conditions, by adding a new bracket at a rate of 27.5% for those whose annual net income exceeds 800,000 Egyptian Pounds. This also helps to balance the tax loss resulting from the increase in the amount of personal exemption.
• Increasing the personal tax exemption limit for the taxpayer to 15,000 Egyptian Pounds annually from 9,000 Egyptian Pounds.
• As of January 2023, electronic invoices shall be used to certify costs and expenses, with the same being applied to electronic receipts as of January 2025.
• Increasing the exemption of the taxpayer from the net taxable income related to life and health insurance by an amount of 10,000 Egyptian Pounds (or 15%, whichever is less) instead of 3,000 Egyptian Pounds.
• Introducing tax exemptions for profits resulting from investment funds, with the aim of incentivizing individuals to participate in institutional investment.
• Postponing payment of capital gains tax by individuals or companies in the event that shares are sold through the Egyptian Stock Exchange to increase the capital of the issuing company. Taxes would therefore only become due upon the disposal of the shares in question.
• Introduction of an exemption for capital gains tax arising from the disposal of shares listed on the Egyptian Stock Exchange during the period of January 2023 until this bill comes into force.

The aforementioned bill aims to establish a high tax council headed by the Prime Minister, with the aim of guaranteeing the rights of taxpayers and helping them fulfill their legal obligations as imposed by tax laws.

However, it should be noted that despite the package of exemptions provided by the bill, it has exposed civil companies (professional companies such as law firms) to tax on dividends, which is arguably unfair and would negatively affect the activity of these companies; as the legal profession generates net revenue making it different in nature to a commercial profession.

In addition to that, the previous companies are already constricted as a result of additional taxes being imposed on their activities, and thus subjecting the companies in question to an additional tax, would increase the cost of the service provided to litigants, which may in turn negatively impact the justice system. This point is particularly crucial to consider when discussing the advantages and disadvantages of the concerned bill.

To conclude, this article aims to highlight that the bill submitted by the government proposes a number of tangible advantages and exemptions for investors, however, the legislator must also take into account the impact of the bills on businesses in all sectors, particularly professional service companies.

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