On Tuesday, the first day of the 2014/15 financial year, Egyptian President Abdel-Fattah al-Sisi issued a decree aimed at expanding Egypt’s tax base by holding individuals and businesses based in Egypt liable for taxes on income earned both in Egypt and abroad.
Sisi also signed into law a 10 percent tax on capital gains, which had previously been withdrawn following objections from investors.
The changes came in the form of amendments to Egypt’s existing income and stamp tax laws.
Among the changes made by Sisi is an amendment to Article 6 of Egypt’s income tax law. According to the new rules, residents of Egypt will be taxed on all income accumulated in Egypt or abroad. Further, even non-residents will be subject to taxes on income from any business or other income-generating activity that is centered in Egypt.
The tax previously only applied to residents of Egypt.
Another amendment, to Article 17 of Egypt’s tax code, adds that enterprises for which Egypt is a center of commercial or industrial activity will be liable for taxes on revenue generated from their activities both in Egypt and abroad.
The law previously covered only revenue from business activities inside Egypt. It was not immediately clear how the government would determine which businesses are and are not “centered” in Egypt.
People who are self-employed or working in non-commercial professions based in Egypt will also be taxed on earning outside of Egypt, as will those profiting from ownership of intellectual property.
Sisi also signed into law a 10 percent tax on capital gains and dividends. A similar law was proposed in May, but after investors protested and the stock-market took a nosedive, it was watered down with an exemption for the first LE15,000 in shares and cash dividends, and a five percent cap on taxes for investors who own more than 25 percent of the company in question. The new law will retain the five percent cap for large stakeholders.
Presidential spokesman Ihab Badawi said in a statement that the decision to amend taxes was a response to the major challenges facing Egypt, which require that the burden of fiscal and economic reforms be borne by as broad a tax base as possible.
The revised budget, approved on Wednesday, called for LE549 billion in revenue in the 2014/15 fiscal year, which Finance Minister Hany Qadry Demian said would be achieved by expanding the tax base via a Value Added Tax and adjustments to property tax and income tax law. According to Ministry of Finance Figures, total revenue collected from July 2013 to May 2014 amounted to less than LE338 billion.
