Back to the complete issue
Monday, 21 January 2019

Tax Authority to mark “cost of investment” as deductible in new banking tax treatment

EXCLUSIVE- Tax Authority to mark “cost of investment” in treasuries as deductible in new tax treatment: The Tax Authority could allow banks to count the “cost of investment” in state treasuries as an expense that would lower their pre-tax income, authority head Abdel Azim Hussein told Enterprise.

Why does this matter? A new tax treatment for income from investment in government debt (announced this past November, but still not enshrined in law) would force banks and companies to separately account for income derived from their holdings of government debt. Analysts initially said that the new accounting mechanism would result in a c.37% effective tax rate for a model bank.

So what’s the news here? Hussein is holding out the possibility that the hard costs associated with investment in treasuries could be effectively considered tax deductible, helping mitigate the impact of the new tax treatment. He added that the Finance Ministry is working with the Federation of Egyptian Banks to set an industry average for the cost of investing in government debt that will be applied industry-wide. The measure would be introduced in amendments to the executive regulations of the amended Income Tax Act, Hussein said.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Etisalat Misr (tax ID: 235-071-579), the leading telecoms provider in Egypt; and Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt.