Ministerial Resolution 610 of 2020 introduced the rules for determining the tax on capital profit of companies for non-residents. The Law articulates that this value is calculated from the net profit value at the end of the tax year, after deducting the brokerage commission. This ministerial decision came based on the 96 tax law of 2015 related to tax shares realized from the capital of companies, whether profits are made inside or outside Egypt.
The quantity presented for the tax is the net profit minus the acquisition cost and the brokerage commission. And the tax differs in the case of legal persons, so the tax is limited to 22.5% of the amount exposed to the tax. In the case of private persons, the tax is calculated according to the sections of Article 8 of Law 91 of 2005.
The full process of the capital tax takes place in four steps. First, non-residents must submit a form on the securities returns to the tax office. Second, the person deposits the required percentage in the bank accounts designated for the Ministry of Finance. Third, the person submits the necessary documents to settle the tax position. Fourth and finally, the tax authority grants the person a certificate stating that the capital gains tax has been settled, similar to the one a service company gets after for paying the VAT.
The documents required to settle the tax position differ, but three main documents are required, and they are: the sale or disposal contract, a fair value evaluation study for shares or shares, and the stock purchase invoice (or the company's establishment paper if the seller or the disposer is one of the founders or subscribers). As is the case with any tax, a person is punished in the event of failure to add a fine, and in the event of evasion, with imprisonment and a fine together.
The law comes after a number of tax increases and new tax laws came out this year, showing the immense economic pressure the lockdown added on the economy. Moreover, it can also be observed that taxation procedures are becoming less and less bureaucratic (i.e. 4 easy and defined steps), a step in the right direction of fully simplified digital processes. The main negative note, however, is “will there ever be more of an increase in taxation in case of a future economic downturn?”. Things seem to be stable at the moment so one can only hope they continue to be while the government processes continue to be more and more developed.