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Egypt to tax people and corporations on income earned abroad Amendment is latest in a spate of reforms including capital gains tax on bourse ratified last week as part of drive to boost tax revenues in 2014/2015 and combat deficit
Egypt on Tuesday ratified amendments which will tax revenues earned abroad by individuals and companies centered in Egypt, in the latest of a series of unprecedented measures designed to replenish the state's depleted coffers after over three years of political turmoil. The new amendments to increase revenues and rein in budget deficit in the fiscal year 2014/15 that starts 1 July, as per the new budget approved by president Abdel-Fattah El-Sisi on Sunday. Egyptian laws consider a person resident if he spends 183 days in the country within 12 months while companies are considered based in Egypt if it was founded in Egypt or if its head quarter is in Egypt. "Those modifications should not affect business environment in as Egypt is signatory of agreements to prevent double taxation with many countries", says Mohamed Abou Basha, Economist at EFG-Hermes. Accordingly, the new taxation system should mainly result in more revenues without greater burden on business as the sums paid to the Egyptian treasury should be deducted from taxes investors pay abroad. In the 2014/15 budget announced earlier this week, the government expects tax revenues from corporations - not governmental institutions - to increase by LE 11 billion ($1.57 billion) to reach LE48 billion ($6.8 billion). Professionals based in Egypt will also be required to pay taxes on any revenues earned abroad. A lawyer or medical practitioner who lives and works in Egypt but does some consultancy or other work abroad will be taxed on all resulting income in Egypt. Tax revenue from self-employed professional is very low in Egypt as tax evasion seems to be higher among this group. Last year, revenue from this group increased unprecedentedly to reach LE900 million ($128 million) compared to LE333 million ($46.5 million) in 2012/13, according to figures revealed by finance minister Hany Kadry during a press conference on Monday. This, however, remains modest compared to the LE21 billion ($3 billion) from the employed . Kadry estimates tax evasion deprives the state of 30 percent of total tax revenue every year. The governmentexpects total tax revenues in the fiscal year 2014/15 to reach LE364.2 billion (roughly $51 billion) or 15 percent of GDP. The government will also impose a 10 percent tax on capital gains and stock dividend starting Sunday. Finance minister said this tax would raise around LE2.6 billion , according to.the published statement of the fiscal year 2014/15. Egypt's stock exchange reacted calmly to the news on Thursday, with the main index EGX30 gaining 1.43 percent. Egypt interim President Adly Mansour also signed, before leaving office, a decree adding a 5 percent tax for three years individuals with incomes in excess of LE1 million and on profits of companies in excess of the same amount. Egypt is also expected to soon implement a property tax postponed several times since 2008. The new budget reveals that the government also intends to implement a VAT (value added tax), that was similarly announced and postponed several times. President El-Sisi, who has temporary legislative powers pending parliamentary elections, had previously refused to approve the initial budget presented to him on grounds that its featured deficit, forecasted at 12 percent of GDP, was too high. The tax reform, along with a LE44 billion ($6.15 billion) spending cut from its sprawling state-subsidy program of petroleum-derived fuels, aims to bring the deficit down to 10 percent by June 2015. Several reforms had been previously announced by several governments since 2008, including ousted president Mohamed Morsi's regime but were repeatedly postponed due to the political situation. The 2013/14 budget was originally based on the implementation of the VAT, the property tax and a subsidy reduction, none of which were enforced. http://english.ahram.org.eg/News/105391.aspx
