Question

(TAX SYSTEMS AFTER CORONA IN EGYPT)

(Deadline: Thursday, 11 June)

You are individually required to prepare and write a research paper about the suggestions and the changes that should be made on the tax systems in Egypt after the Coronavirus pandemic. You must show your point of view and explain the reasons for the suggestions that you made in your research. Your research report should be based on the following topics that were covered throughout the semester:

•   Building Reality Tax (BRT) (10 points)

Answer 1

TAX SYSTEMS AFTER CORONA IN EGYPT
In response to COVID-19, the Egyptian Government is currently prioritizing health in order to limit the spread of this pandemic disease in Egypt. In doing so, they have recently announced several tax and legal measures aiming to alleviate human crowding, by facilitating the tax settlement process/procedures for taxpayers (both Corporates and Individuals) in a manner that would respect the social distancing policy recommended by the World Health Organization and the Egyptian Government, in an effort to reduce the spreading of COVID-19.

Several tax measures have been decided by the Egyptian government in order to mitigate the harmful effects of the COVID-19 outbreak:

1.   Capital gains tax (“CGT”) on the capital gains realized by Egyptian and tax-residents from disposing of securities listed on the Egyptian Stock Exchange (“EGX”), will be put on hold until the 31st of December 2021.
2.   For non-tax-residents, capital gains realized from disposing of their listed securities, will be permanently tax exempt (law not issued).
3.   Withholding tax (‘WHT”) imposed on dividend distributions made by EGX listed companies has been reduced from 10% to 5%.
4.   Suspension of the administrative attachment on all taxpayers who have payable taxes against payment of 10% out of their due taxes and send their tax files back to be settled via settlement of tax disputes committee
5.   Stamp tax imposed on the total proceeds realized by tax residents of Egypt from selling or buying listed securities on the EGX, has been reduced to be 0.05%. instead of 0.15% (law not issued)
6.   All spot transactions on the EGX will be exempt from stamp tax in Egypt.
7.   The Central bank of Egypt ("CBE") has decided to cut down the credit and discount rate from 12.75% to 9.75%.
  

Key takeaways
New tax and legal measures have been recently announced by the Egyptian Government to facilitate the tax settlement process for both Corporate and Individual taxpayers in this unprecedented situation. These measures are summarised below:

1.   The ETA is currently accepting cheques/cash payments at its executive units to avoid human crowds at banks, without charging taxpayers for administrative fees.
2.   Payment of health insurance contributions has become electronically activated through the ETA’s website.
3.   The payment of real estate tax has been extended for a six month period for entities operating in the industrial and tourism sectors.
4.   From a legal perspective, GAFI currently permits local companies to hold their meetings virtually via conference and/or video calls. However, they are expected to record the meetings and submit the evident CDs that include such records to GAFI.
5.   New tax updates were recently announced by the Egyptian Government mainly concerned with reducing/eliminating the tax burden (i.e. WHT, CGT and stamp duty) on EGX transactions, in order to encourage investments, stimulate the Egyptian economy and rectify the anticipated post COVID-19 economic imbalance.

Building Reality Tax (BRT) Property Tax in Egypt

Property tax is imposed on all buildings in Egypt. Tax is borne by the owner whether a natural person or a corporate body.

The tax rate is 10% on the annual rental value of the taxable buildings after the deduction of 32% (30% for residential units) allowed for maintenance.

The tax is due as from the fist of July 2013 and afterwards; and to be collected on two equal installments (the end of June and the end of December of the same year).

Taxpayers are required to file a tax return and failure to do so will expose the taxpayer to pay a penalty.

Deferral of real estate tax settlements
The Egyptian Cabinet may allow the deferral of the real estate tax due settlement (in full or in part), for a period that shall not exceed three months (renewable for a similar three month period), for all or some of the licensed properties that are actually used in the economic, production or service sectors which have been identified by the Egyptian Cabinet as negatively impacted by COVID-19.