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Government to apply temporary wealth tax on companies - Daily News Egypt

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Government to apply temporary wealth tax on companies

The Egyptian government expands scope of exceptional tax on wealth to cover companies and corporations rather than just individuals

By Abdel Qader Ramadan

The interim government has imposed a temporary additional yearly tax of 5% for three years starting from the current tax period according to the Official Gazette on Friday, Reuters has reported. The additional tax covers those whose net income exceeds EGP 1m for the income of natural persons, or the profit of “legal persons,” referring to companies, organizations and institutions.

After the new tax is implemented, rates paid by companies on profits between EGP 1m and EGP 10m will rise from 20% to 25%. Company profits of over EGP 10m will be taxed at 30% rather than 25%.

Mohamed Zaki El Sewedy, president of the Federation of Egyptian Industries, said that industrial companies welcomed the imposition of a tax on individuals. El Sewedy added that companies voiced no opposition to this tax being applied on companies as well.

“Any decision that serves the interests of the country, industry is ready to participate and take on a share of it…and industry will bear it,” said El Sewedy, adding that the country “is in a difficult economic situation and we must all stand with a comprehensive plan for reform that includes addressing the subsidy system and providing energy.”

“In principle, the new tax is acceptable in light of current economic conditions… and as long as a tax is applied on individuals, a tax on companies must be applied as well,” says Reham El-Desoki, economic expert and former chief economist at Beltone investment bank.

However, El-Desoki said that the minimum level of profit that the tax will be applied to must be raised for companies. She noted that EGP 1m “is not a significant amount” and so the tax would affect implementation on small and medium companies, which she said represent the majority of companies operating in Egypt.

She said that the minimum level of profit for which the tax will be deducted must be raised so that large companies able to pay the tax can now do so.

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