CAIRO: The capital gains tax on stock market profits and dividends will be applied “very soon” with no amendments, Prime Minister Ibrahim Mahlab said in an interview with Al-Watan newspaper published Monday.
On May 28, the third day of the presidential elections, former Cabinet headed by Mahlab mulled a 10 percent tax on capital gains achieved annually in investor’s portfolio in the stock market, cash dividends, and bonus shares.
The tax elicited widespread criticism on the grounds that it could reduce cash flow into the Egyptian stock exchange (EGX).
EGX recorded its biggest daily loss in almost a year after the tax was announced on June 1. In response to the market slump and the strong opposition to the tax, the Cabinet decided to amend the tax.
After the amendment, bonus shares will not be taxable without the need for a time-limit minimum to retain investors. The tax on dividends will be a minimum value of distributions at 15,000 EGP.
Minister of Investment Ashraf Salman said early June that the capital gains tax on stock market is “necessary” for bolstering the State budget, according to MENA. He stressed that “the government has no plans to back on such tax.”
Pioneers Holding Managing Director Mohsen Adel said any proposal to impose taxes on EGX profits will hurt its ability to lure new investments, which will have a negative impact on current liquidity.
“The shareholders will step back from reinvesting their money in the stock market,” Adel told The Cairo Post. This will dramatically affect the revenues needed to maintain market stability and the exchange’s role as a key source of financing investments in Egypt.