Egypt taxesTax Reforms: Income, and Real Estate Taxes

Policy Brief

Published: September 2014

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Summary

Since July 2014, the Government of Egypt (GoE) embarked on aggressive reforms regarding the taxation rationale and system in Egypt in an attempt to at least prevent the budget deficit from widening – in absolute terms – compared to the fiscal year (FY) 2013/2014. According to preliminary official calculations, the budgeted deficit is estimated to have reached EGP 243 bn in 2013/14, representing 12% of GDP. The reforms, along with other budgetary measures, aim at reducing the deficit to 10-11% of GDP in 2014/15.

The tax reforms aim at meeting two main objectives; 1) increasing government revenues as a primary target, and 2) widening the tax base for potential future revenues, especially as economic conditions improve. These reforms are tackled in conjunction with rationing the expenses side of the budget of Egypt as evident by the energy subsidy rationing. The tax reforms range from increasing taxes on the current taxable base such as increasing personal and corporate income taxes by additional 5% on incomes above EGP 1 mn, to introducing new taxes on new base such as introducing capital gains, dividends and real estate taxes.

The additional revenues the government aims at collecting by enacting income and real estate tax reforms were estimated at EGP 13.5 bn.

In addition, the GoE is currently drafting a law for the Value-added taxes (VAT) to replace the current existing general sales taxes. The proposed law would widen the tax base to include a number of services that were not included in the current sales tax regime, which is a further attempt to increase budget revenues to finance the deficit from sustainable resources.


Table of Contents

I- Introduction

II- Overview on Income Tax Amendments

III- Corporate Income Tax Amendments

  1. Personal Income Tax Amendments
  2. Income Taxes on Dividends and Capital Gains
  3. Calculating the Acquisition Price

Illustrative Example 1: A portfolio acquired prior to 1 July 2014

Illustrative Example 2: A portfolio acquired post 1 July 2014.

Illustrative Example 3: A portfolio acquired pre and post 1 July 2014

4. Calculating Capital Gains/Losses

Tax Settlement for Egyptian Investors

Tax Settlement for Foreign Investors

Income Taxes on Dividends Distributions

Settlement of Dividends Taxes

IV- Real Estate Tax Taxes

  1. Tax Rate and Payers
  2. Exemptions
  3. Tax Payment
  4. Calculation of Payable Taxes

Households’ Real Estate Units

Commercial Real Estate Units

Industrial Real Estate Units.


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