By: Lamia Nabil
The 10% tax rate announced on Tuesday by the Egyptian tax Authority (ETA) targets profits generated via sale of 100% of National Société Générale Bank’s (NSGB) shares to Qatar National Bank (QNB). The tax will be imposed on profits achieved by investors as a result the average difference between the buy and sell prices for the shares, said head of Misr for Central Clearing, Depository and Registry (MCDR) Mohamed Abel Salam.
“This means not all investors will pay tax the 10%, as not all of them gained the same profits,” he revealed.
The MCDR is the body which applies registry, clearing and settlements for securities traded on Egyptian capital markets.
Salem explained that since share price was EGP 38.61 at the time of the sale to QNB, those who purchased the shares at this price or higher before selling them to QNB will therefore not be subject to the tax. Those who purchased it below this price, and later sold their shares to QNB making a profit in turn, will be subject to the 10% tax.
He added the tax article was drafted only three months ago.
Salem also said that Société Générale, NSGB’s parent company, will be exempt from the tax due to a bilateral tax agreement between Egypt and France preventing double taxation, “so they will pay their taxes in France only”.
The ETA sent a formal letter to the Egyptian Exchange (EGX), Tuesday, to announce that that the deal will be subject to the 10% tax rate in accordance with article 65 of law number 101 from 2012,.
The ETA explains in its letter that “the law provides for the imposition of a tax by 10% without deducting any costs on profits from securities transactions, as well as cutting the tax of 10% and supplying it to the authority within fifteen days from the beginning of the settlement next month without prejudice to the obligations of the taxpayer or the performance of the tax due according to approved regulations”.
The exemption of Société Générale from the tax means that the remaining 23% of the shares, owned by individual investors and investment funds, will also be subject to the 10% tax rate.