TAX UPDATES EGYPT 2015

Transcription

1 TAX UPDATES EGYPT 2015 Tax Audit Advisory Legal Services Copyright Hilal & Partners (Vision Consulting Group)

2 Contents 2 1) Preamble 2) Corporate Profit / Income Taxes 2/1 Introducing New Tax-Base Concept. 2/2 Tax on Capital Gains. 2/3 Tax on Dividends. 2/4 Tax Losses. 2/5 Taxability of Investment Funds. 2/6 Anti-Abuse / Anti-Avoidance Rules. 3) Payroll Taxes 4) Stamp Taxes Disclaimer: The information contained herein is written on a need-to-know base and does not intend for particular case(s). Despite this document was accurately written to reflect Taxation/Legal updates in Egypt, it is not in any way guaranteed to remain accurate as of the date in which it would be received or that it would be accurate in the future. Therefore we strongly advice not to act upon the information within this document prior to getting an advice throughout a precise examination of each particular case or investment opportunity.

3 1) Preamble 3 Many are expecting that the period follows the latest presidential elections (took place in June 2014) shall witness lots of challenges in almost all economical aspects in Egypt, most importantly the Tax Legislations. The current Government, apparently, strongly believe in the concept of increasing the level of taxes either Vertically (through increasing the tax rates of the current applicable taxes) or Horizontally (through imposing new taxes and levies). Currently, starting the 1 st July, another batch of Tax Measures was issued (coinciding the first date of the State Financial Year 2014 / 2015), as an attempt to collect more tax revenues aiming at closing Gaps of the State Budget s deficit! We are please to summaries herein the most important measures which was introduced in 30 th June 2014 by Law 53 for 2014 with effective applicable date 1 st July 2014.

4 4 2/1 Introducing New Tax-Base Concept. The new Law had introduced new Articles which, for the first time, introduces the concept of imposing the Egyptian Taxes on the Worldwide Income for: - The Resident Person - The Resident Entity - The Resident Corporate This applies in case Egypt is being the Effective Place of Management for that Person / Entity / Corporate. Accordingly, the Resident Person / Entity / Corporate shall be taxable in Egypt on the offshore revenues as well as the onshore revenues.

5 5 2/2 Tax on Capital Gains (CGT) on Sale of Shares. It applies on the gains from sale of shares (whether these shares are listed or not) and whether these gains were derived from International or Domestic sources. Tax Pool (Net Average Portfolio) = Disposal Price / Share Exchange Price (Acquisition Price + Cost to Sell / Broker's Commission). Taxable Person Resident Individual Non-resident Individual Resident Corporate Non-resident Corporate Corporate Tax Rate (CTR) Withholding Taxes on Account (reconciles CTR) Final Withholding Tax Rate Notes 10% 6% 0% Final Tax due is determined subject to adjustments to the final net taxable profits. 0% Not Applicable 10% Double Tax Treaties provisions shall be considered. 10% 6% 0% Final Tax due is determined subject to adjustments to the final net taxable profits. 0% Not Applicable 10% Double Tax Treaties provisions shall be considered.

6 6 2/3 Tax on Dividends - (Individuals). It applies to the Income from Dividends whether these Dividends are driven from International or Domestic sources. Bonus Issues / Shares are not taxable. Taxable Person Tax Pool Corporate Tax Rate (CTR) Withholding Taxes on Account (reconciles CTR) Final Withholdin g Tax Rate Notes Resident Individual Domestic Dividends Over EGP 10K (if Taxpayer is not trader). 5% if holds above 25% Participation in the respective Company with two years Acquisition period of the shares. 1% 0% Final Tax due is determined subject to adjustments to the final net taxable profits. All Domestic Dividends. 10%If above mentioned conditions are not met. 1% 0% Nonresident Individual Offshore Dividends. All Domestic Dividends. Progressive Rates from 0% to 25%. 0% Not Applicable 10% Double Tax Treaties provisions shall be considered. 0%

7 7 2/3 Tax on Dividends (Continued) - (Corporations). The full Participation Exemption has been canceled and Tax currently applies to the Income from Dividends whether these Dividends were derived from International or Local sources. Taxable Person Tax Pool Corporat e Tax Rate (CTR) Withholding Taxes on Account (reconciles CTR) Final Withholdin g Tax Rate Notes Resident Corporate 10% of All Domestic & Offshore Dividends (if holds above 25% Participation in the respective Company with two years Acquisition period of the shares). 25% 5% 0% Final Tax due is determined subject to adjustments to the final net taxable profits. 100% of All Domestic & Offshore Dividends (if above mentioned conditions are not met). 25% 10% 0% Final Tax due is determined subject to adjustments to the final net taxable profits.

8 8 2/3 Tax on Dividends (Corporations) - (Continued). Taxable Person Tax Pool Corporate Tax Rate (CTR) Withholding Taxes on Account (reconciles CTR) Final Withholding Tax Rate Notes Non-resident Corporate 100% of the Domestic Dividends. 0% Not Applicable 5% (if holds above 25% Participation in the respective Company with two years Acquisition period of the shares). Double Tax Treaties Provisions shall be considered. 100% of All Domestic Dividends. 0% Not Applicable 10% (if above mentioned conditions are not met). Non-resident Corporate with a Permanent Establishment (PE) in Egypt. 100% of All Domestic Dividends / Profits. (e.g. Foreign Branches). 0% Not Applicable 5% or 10% based on circumstances Profits shall deemed to be distributed within 60 days from Year end.

9 9 2/4 Capital Tax Losses. The new Law had introduced new Article pertaining to the Capital Gains Tax (CGT) which, states that the Capital Tax Losses shall: a) Offset any Capital Gains realized during the same tax year. b) Be carried forward to the following maximum three tax years.

10 10 2/5 Taxability of Investment Funds. The new Law had introduced significant changes to the tax treatment for the Investment funds. The Tax Exemptions for the investment Funds are now limited to the following: a) The Dividends distributed by the investment Funds which allocate at least 80% of its investments in Equity Instruments (Shares). b) The Dividends distributed by the Holding Investment Funds which allocate 100% of its investment in the Investment Funds mentioned in a) above. C) 90% of the Dividends received by the above Funds mentioned in a) & b). D) Yields received by the Investment Funds which allocate its investment wholly & exclusively in the Monetary Investments. E) Yields of the Listed Bonds (excluding the Governmental Bonds).

11 11 2/6 Anti-Abuse / Anti-Avoidance Rules. The new Law had introduced an Anti-abuse / Anti-avoidance rule which stipulates that the Tax Department shall have the right to disallow / disregard the effect of any transaction which it deems to have an Abusive Nature that may entirely involve tax avoidance or tax deferral by the Taxpayer. The Law states that such an abusive transaction could take the form of a contract, an agreement or even a promise to conduct a commercial transaction either with current or future effect. According to this new rule, the Tax Authority shall have the right to re-assess / amend the Taxpayer s tax return to show the effect of this rule. For this purpose the Tax Authority shall have the right to real Commercial Substance of the transaction.

12 3) Payroll Taxes 12 Payroll Tax Exemption for the Medical / Life Insurance policy. The Employee s Medical / Life Insurance policy s cost shall be exempted for Payroll Tax purposes with the following limits: -15% of the Net Taxable Income or; -EGP 10K which ever is the less.

13 4) Stamp Taxes 13 StampTax on Selling of Shares. The Stamp Tax on Selling of Shares imposed by Article 83 (Stamp Tax Law 111 for 1980) which is 0.1% payable by the seller and the 0.1% payable by the Buyer was abolished.

14 14 Hilal & Partners (Vision Consulting Group) We are fast growing group of professional Accountants, Tax & Legal Consultants operating in the Egyptian market for years. During the past two decades we have acquired wide range of experience through serving significant number of multi-national and national companies. Our partners and directors are members of prestigious professional bodies such as The Association of Chartered Certified Accountants (ACCA) in the UK, IFA (the International Fiscal Association) in Netherlands, EST (the Egyptian Society of Taxation), the Chartered Institute of Marketing, Chartered Institute of Banking, the Arabian Lawyers Federation and the Egyptian Bar. Strategic Partner We are proud to be member firm of CPA Associates International Inc. (CPAAI). As one of the top 10 worldwide independent associations of accounting firms, CPA Associates International, was established as a global group of high-quality independent CPA and chartered accounting firms; it is market exclusive, with members in major cities throughout the world. For over 50 years, CPAAI has provided quality services and resources to members now in over 65countries. The world-wide member firms provide financial, business and tax advice to clients in Asia Pacific, Europe, Middle East, Africa, Latin America, and North America. Through this international organization, the professionals are available to provide information, resources, fresh ideas, consulting, and planning assistance to other members. For more information about our office and the Association, please contact: Nicki Lynn EMEA Regional Manager nlynn@cpaai.com +44 (0) Waleed Hilal Managing Partner Egypt Practice wh@vision-consulting-group.net

15 For more information please contact us on the below details Hilal & Partners Chartered Accountants and Business Advisors Vision Consulting Group Address : Building # Zone ¾ - 4 th District - Fifth Settlement New Cairo Cairo Egypt. Tel : Fax : Mobile : Website : wh@vision-consulting-group.net 15