Arab Today, arab today egypt cabinet approves capital gains tax raises income taxes
Last Updated : GMT 21:09:51
Arab Today, arab today
Arab Today, arab today

Egypt Cabinet approves capital gains tax, raises income taxes

Arab Today, arab today

Arab Today, arab today Egypt Cabinet approves capital gains tax, raises income taxes

Cairo - Arabstoday

Govt approves implementation of capital-gains tax on stock-exchange profits, along with two new tax brackets for high-income individuals The government of Prime Minister Hisham Qandil has approved implementation of a capital gains tax (CGT) on profits realised on the stock exchange, along with two new income tax brackets levied on individuals, Finance Minister Momtaz El-Said announced Wednesday. The CGT, which will stand at 10 per cent, will only be levied on the initial transaction of any security in the secondary market following the initial public offering (IPO), El-Said told reporters at a press conference following a Wednesday cabinet meeting. \"Taxes will be imposed on gains achieved on each IPO for the first time and a tax on acquisitions if the deal exceeds 33 per cent of the company\'s capital or shareholder rights,\" the finance minister was quoted by Reuters as saying. Normal trading on the stock exchange following the IPO will not be subject to any taxes. Stock dividends, too, will not be subject to any additional taxes. The move represents the first time for Egypt to impose such a tax since it reinstated its stock exchange in 1992 after a three-decade hiatus. The 10 per cent levy will only be implemented on corporations; all individual trading, meanwhile, will be exempt. El-Said did not give an exact date for the implementation of the tax. \"The law has not yet been drafted, and will be enacted by either the president or the parliament if it is formed,\" he told Reuters. The decision to levy taxes on capital gains comes despite repeated assertions by bourse officials that such a tax would not be \"suitable\" for the Egyptian market. In mid-2011, then-finance minister Samir Radwan proposed a 10 per cent tax on stock dividends in hopes of offsetting Egypt\'s rising budget deficit. The proposal, however, was quickly rejected, and Radwan was removed in a cabinet reshuffle. According to data from Ernst & Young LLP, Turkey, Mexico, South Korea and the Netherlands all have zero rates of taxation on capital gains. Instead, these countries all levy taxes on income from dividend receipts, a practice that is not implemented in Egypt. Progressive tax The minister also revealed that the cabinet had approved two new tax brackets to be put in place on high-income individuals. A 22 per cent tax will be levied on individuals with annual incomes between LE1 million and LE10 million, while annual incomes higher than LE10 million will be taxed at a rate of 25 per cent. Progressive taxation, a longstanding demand by many leftist and revolutionary groups in Egypt, has been ignored by consecutive governments since former president Hosni Mubarak was ousted in February of last year. Corporate tax rates were amended in mid-2011, when the tax rate on incomes higher than LE10 million was raised from 20 to 25 per cent. The new Egyptian personal-income tax structure will be as follows: First segment (LE5,000 – LE20,000): 10 per cent Second segment (LE20,000 – LE40,000): 15 per cent Third segment (LE40,000 – LE1 million): 20 per cent Fourth segment (LE1 million – LE10 million): 22 per cent Fifth segment (LE10 million and up): 25 per cent From ahramonline

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