Last Update 21:41
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
Ahram Online, Friday 4 Jul 2014
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el sisi
President Abdel Fattah El-Sisi (Photo courtesy of El-Sisi official campaign)
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 government expects 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. 
 




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Aladdin, Egypt
06-07-2014 12:03pm
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Unemployment Compensation
I hope we have this program to temporarily take care of the workers who will lose their jobs. It is a standard practice in capitalistic societies. We need to suffer to get better.
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Saba E. Demian, M.D.
05-07-2014 09:41pm
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More Taxation will stifle the economy
The problem which causes the empty coffer of Egypt is not lack of revenue but are gaping holes in the bottom and sides of the coffer due to corruption. This corruption has many ugly faces, bribery, embezzlement, right-out theft, avoiding legitimate tax laws already on the books and others. Please Mr. President, plug these holes before you stymie investment both from within and from overseas. You asked at the outset of your presidency for improvement in the nation's character. It is wiser to insist on that before you apply draconian measures to heal a teetering economy. Saba E. Demian, M.D.
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Sam Enslow
05-07-2014 09:26pm
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Money pot
US tax laws which requires taxation when profits are returned to the US provide an excellent source for investment in Egypt. US corporations have between USD 1 trillion and 1.5 trillion parked overseas looking for places to invest. These firms represent all aspects of the Egyptian economy from telecommunications, It, agriculture, etc. This is investment money - not loans or grants. The companies include names like Cisco, Apple, ADM, IBM, Coke, Pepsi, and many more. Even rail roads and airports could be privately funded. Heathrow in London is a private company.
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3



expat
05-07-2014 10:34am
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depends how its done
if the salary etc is already taxed at the country of origin,its double taxing and not justable if egypt for example has a treaty with the country in question, it can decide where to tax,here or f.e in saudhia
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Aladdin, Egypt
04-07-2014 09:34pm
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Justice
Justice for all. When I work overseas; I represent Egypt and enjoy its protect. When I return, I use its resources. Investment taxes (capital gain taxes) is also fair. If I make profit I pay taxes after detecting expenses. If I lose, I do not pay taxes. Allah AKber. We need to lift everyone and go forward.
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Aladdin, Egypt
04-07-2014 06:58pm
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Allah AKber
It is called Foreign Income tax. It is done by all civilized countries. in USA, If you stay abroad more than 3 years you will be exempted. Egypt needs you.
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