On the 12th January 2021, the Ministry of Finance (MoF) of Egypt published an English guideline on the tax treatment of capital gains realised from the sale or disposal of unlisted shares on the Egyptian Stock Exchange by non-residents. This guideline was first published in Arabic following the ministerial decree No. 610 of 2020.
This guideline has been prepared with the aim to help non-residents (whether a natural or judicial person) to understand the tax-related procedures to be followed when selling or disposing of shares not listed on the Egyptian Stock Exchange and realizing capital gains from a sale or disposal transaction.
The guideline covers the following:
1. General rate of Capital gains
2. Tax treatment of Capital Gains
3. Legal liability
The capital gains tax (CGT) rates are as follows:
Natural persons – Net taxable capital gains x individual income tax from 0% to 25% as per standard tax brackets
Judicial persons – Net taxable capital gains x 22.5%
Net Taxable Capital Gains = Sale or Disposal Price – Acquisition Cost – Brokerage Commission.
If a non-double tax treaty exists between the country of residence of a non-resident taxpayer and Egypt, which provides for a reduction in tax rates or a tax exemption, the taxpayer can benefit from the treaty rate by approaching the Egyptian International Tax Dept with the following document:
1. Certificate of residence
2. Beneficial owner information
3. Any other documents required by the treaty or needed during the review
The documents will be reviewed by the International Tax Dept, then a decision will be released. A copy of this decision letter will then be attached when submitting the CGT form.
The guideline also provides for the following steps for the tax treatment of capital gains:
1. A form shall be submitted by a non-resident to the Tax Office for Securities Revenues (see guideline attached)
2. Tax due shall be paid (see guideline attached)
3. The non-resident to submit, upon request, the documents required to settle the tax situation on capital gains. (see guideline attached)
4. Provision of a tax clearance certificate to the non-resident confirming that they have settled their tax situation on capital gains.
Lastly, the guidelines provide information on legal liability and penalties. This includes that the late payment of capital gains tax due will be subject to a delay fine (interest) equal to the credit and discount rate announced by the Central Bank plus 2%. In cases of evasion, a fine equivalent to the unpaid tax may be imposed, as well as possible imprisonment of between 6 months and 5 years.