On 15 June 2023, the Egyptian Tax Authority published Law No. 30 of 2023 in the Official Gazette amending some provisions of the Income Tax Law No. 91 of 2005. The Law entered into force on 16 June 2023. The key amendments to the Income Tax Law are as follows:
- Updates the definitions of certain legal entities, such as related parties, non-compliant contract companies, civil law-based entities, and permanent establishments, to align with OECD guidelines.
- The withholding tax (WHT) exemption on interest for loans exceeding a three-year term has been removed for private and public sectors, as well as the general public. However, this exemption remains in place for Government, local government units, and other public juridical persons.
- Loans existing before the recent amendment to the tax law can still benefit from the WHT exemption if at least one interest payment was made before the new tax law’s issuance on 16 June 2023.
- The new amendments introduce a gradual reduction in the ratio of the thin capitalization rule. The ratio will be 4:1 for the fiscal year 2023, 3:1 for the fiscal year 2024 to 2027, and 2:1 starting from the fiscal year 2028 onwards.
- Residents will now be required to pay taxes on capital gains resulting from trading in listed shares. This tax will also encompass investment distributions originating from special mutual funds. Additionally, the calculated capital gains for taxation purposes will incorporate a 50% increase.
- A new measure for dividends has been introduced, featuring a tax deferral option for both individuals and legal entities engaging in the sale of shares on the Egyptian stock market with the aim of augmenting their company’s capital.
- As a result of the increase in the personal exemption and the expansion of the zero-rate bracket, a new tax bracket has been introduced at 27.5% for individuals who earn an annual income exceeding EGP 1,200,000.
