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Wednesday, 16 October 2019

FinMin approves plan to kill capital gains tax on EGX trades, cut stamp tax by a third

FinMin approves plan to kill capital gains tax on EGX trades, cut stamp tax by a third: The Finance Ministry has “preliminarily approved” proposals to scrap plans to introduce a capital gains tax on EGX trades and to slash by as much as one third the stamp tax on EGX trades, Egyptian Capital Markets Association (ECMA) President Mohamed Maher said, according to Al Mal. The ECMA made the proposal to “reduce the tax burden on investors,” he said, and the ideal now moves to cabinet for review. If signed off by the ministers, it would then require approval by the House of Representatives before becoming law.

A big tax cut for investors: The plans as disclosed by Al Mal would, if accurate, lower stamp tax to 0.1% from 0.15% for resident and non-resident investors alike. What’s more:

  • Resident investors who lose on an investment in any one publicly traded company in a given tax year would be refunded their stamp tax;
  • Same-day transactions by resident and non-resident investors would be exempt from stamp tax;
  • The central clearing house MCDR would walk back through transactions each year and refund stamp taxes paid to any investor found to have paid stamp taxes worth more than 10% of their realized profits for the year (we’re really not clear on the mechanism here and will be looking for more detail).

Background: The government planned to impose a 10% capital gains tax in May 2020 covergin gains made trading EGX shares. The proposal had been “temporarily” shelved in 2017 shortly after having been introduced, but was expected to come into effect in 2020 at the recommendation of the IMF. Back in 2017, the tax was put aside in favor of a provisional 0.125% stamp tax on trades that was scheduled to rise to 0.15% and 0.175% over a three-year-period. Parliament, however, voted at the end of the last legislative session to leave the tax unchanged at 0.15%.

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