Music to our ears: Getting that parallel market rate tax write off. Our friends at prominent Cairo advisory firm Nasr Aboul-Abbas & Co, an independent member of Morison International, believe that the tax law as it stands allows companies to write-off expenses incurred in sourcing foreign currency outside the banking system in the period from 1 January through the 3 November float of the EGP. The argument is based on article 22 of law 91/2005, as the cost of the FX acquisition is considered a direct tax deductible cost essential to engaging in commercial activities. The executive regulations of the law explicitly allow for writing off expenditures without receipts for up to 7% of documented general and administrative expenditures. Nasr Aboul-Abbas & Co say this article is it at odds with article 22 of the law, which did not set a limit on the deductions and, given the precedents in accounting for the FX costs that require the Tax Authority to acknowledge the parallel market rate, the firm believes the Authority should acknowledge all the costs incurred in acquiring FX from the beginning of the year up until the date of the EGP flotation.

The other option? The variance between the official and parallel market rate falls straight down your income statement, where you’re then taxed on phantom profits. You can read the firm’s opinion here (pdf, Arabic) and given their track record — and the problem so many in the community face with FX this year — we’re hoping this argument gets wider attention.