Egypt announces stock market incentives to improve business environment

Cabinet abolishes stamp duty on stock market transactions for resident investors, reduces tax on profit realized in new offerings by 50% for first 2 years

Egypt has announced a set of stock market incentives aiming to improve the investment and business environment. In a Wednesday meeting, Egypt's Prime Minister Mostafa Madbouly directed that concerned authorities reduce trading expenses on the Egyptian Exchange (EGX) and service charge in the Misr for Central Clearing, Depository and Registry (MCDR).
Madbouly also directed the establishment of a special unit in the General Authority for Investment and Free Zones (GAFI) to provide a fast track for stock exchange companies, as well as study the amendment of the preferred shares system so that there is greater flexibility and freedom in their issuance.
Nader Saad, the Egyptian Cabinet Spokesperson, stated that this package of incentives was presented in coordination with the Ministry of Finance, the EGX, the Financial Regulatory Authority (FRA), and the securities industry parties, with the aim to boost the competitiveness of the stock market.
These incentives include the abolition of the stamp duty on stock market transactions for the resident investors, and deducting all expenses related to trading and preserving shares and other tax bases.
This is in addition to deducting the tax base of the money invested in the stock market in the event of profits. This would contribute to maximising the return on investment and achieving justice among the various savings pools.
Furthermore, the new incentives include new ways to calculate profits, by comparing the acquisition price or the closing price of the shares, whichever is higher compared to the selling price to increase the returns of investors.
Nevertheless, profit tax for new offerings on EGX will be reduced by 50% for the first two years of the law's issuance, and postponing the payment of the tax until the cash sale process is achieved, whenever the acquiring party is listed on the EGX.
This aims to encourage listed companies to acquire unlisted companies and create large entities that help in the growth of the market.
Saad also revealed that no tax files will be opened for individuals investing in the stock exchange, and the clearinghouse will calculate and collect the tax after deducting all the expenses that he requested to be entered and the incentive, and that will be at the end of each year.
It was also agreed to reduce the tax rate on individual investors through stock funds to 5% on the profit achieved, exempt equity investment funds from all taxes on shares, and assign the fund to calculate and supply them without opening tax files. Venture capital investment fund will be exempted unrestricted shares of start-ups and a tax reduction for policyholders to 5% in the event of profits.
These incentives are the result of several meetings among the Prime Minister; Ministers of Finance and Public Enterprise Sector; EGX Chairperson; FRA Chairperson;legislators; and market leaders.