The Ministry of Finance has decided to reduce the stamp tax on stock market transactions to 0.5 per thousand from 1.5 per thousand on dealings of sellers and buyers separately, while postponing the application of the capital gains tax for a year, instead of May.
The decision will be presented to the economic ministerial group in its meeting today. The discussion is supposed to include approving incentives to stimulate the Egyptian Exchange (EGX), such as giving companies a tax deduction if they resort to offering in EGX, in order to stimulate the money market.
Former Prime Minister Ibrahim Mahlab decided in July 2014 to impose a capital gains tax on EGX transactions by 10% and another on cash dividends at the same rate. Afterwards, it was decided to postpone the application in May 2015 for two years, then again in May 2017 for three years, ending in 17 May of this year.
Mohamed Maher, chairperson of the Egyptian Capital Market Association (ECMA), said that the association seeks, through its discussions with the Ministry of Finance, to abolish the stamp tax on the market during the current period, while postponing the capital gains tax, and reducing the dividend tax of companies listed on EGX to 5% instead of 10%.
ECMA had met with a number of ministers of the Economic Group, most notably Hala El-Said, Minister of Planning, to explain the implications of imposing taxes on EGX and its proceeds declining against the large losses incurred by the market since the approval of those taxes. A decision on stock market taxes is expected to be issued after the end of Monday’s session.
ECMA has finished preparing its proposals to stimulate direct and indirect investment in the Egyptian Stock Exchange by reducing taxes imposed on traders.
The association’s proposals include postponing the application of capital gains tax on EGX transactions for another three years until May 2023, provided that payment begins in April 2024. The cost of the components of the total portfolio of an investor will be based on the share price the day the investor purchases it or the stock closing price immediately after the tax is applied, whichever is higher.
The association suggested that foreign investors living outside of Egypt would be completely exempted from the capital gains tax, provided that foreign investors pay a stamp tax of 0.1%, instead of the current 0.15%, while Egyptians would be completely exempted from stamp tax, and all dealers will be exempted from paying the stamp tax on the transactions on the same day.