Non-resident companies with a branch or permanent establishment in Egypt are subject to tax on the income attributed to the branch or permanent establishment in substantially the same way and at the same rates as resident companies. Unless a treaty provides otherwise, the after-tax profits of the permanent establishment are deemed to have been remitted to the foreign head office within 60 days from year-end. The deemed remittance is equated with a dividend distribution and attracts a withholding tax at the rate of 10% (5% until 30 September 2020).
Effective 1 October 2020, capital gains realized on the disposal of listed securities (including treasury bills and government bonds) by non-residents are exempt from the capital gain tax. Previously, capital gains realized by non-resident entities on the sale of shares listed on the Egyptian stock market were subject to tax at 10%. However, this tax was suspended from 17 May 2015 until 30 September 2020 as a part of COVID-19 measures and subsequently permanently removed effective from 1 October 2020.
Gains realized on the sale of unlisted shares are subject to tax at the standard corporate income tax rate of 22.5%. On 13 December 2020, Egypt published guidelines on the tax treatment of capital gains realized by non-residents on the sale/disposal of unlisted shares. The guidelines cover various areas including the applicable tax rates, the computation methodology of net taxable capital gains, the tax form to be filed and the documents required to be submitted by non-residents in order to claim double tax treaty benefits.
Failure to comply with the requirements attracts the following penalties:
- A penalty calculated at the credit and discount rate of the Central Bank plus 2 percentage points in case of delay in payment of the capital gains tax; and
- A fine equal to the unpaid tax and possible imprisonment for a period of between 6 months and 5 years in case of tax evasion.
An overview of taxes levied on different types of capital gains, earned during different periods of realization is given as follows:
- The period of realization and tax rates for listed shares are:
- From 1 July 2014 until 16 May 2015- 10%;
- From 17 May 2015 until 30 September 2020- Waived; and
- From 1 October 2020 onwards- Exempt;
- The period of realization and tax rates for unlisted shares are:
- From 1 July 2014 until 20 August 2015 - 10%; and
- From 21 August 2015 onwards - 22.5% (standard corporate tax rate);
- The period of realization and tax rates for treasury bonds are:
- From 17 May 2020 until 30 September 2020- Waived; and
- From 1 October 2020 until 31 December 2021- Exempt;
- The period of realization and tax rates for treasury bills are:
- From 17 May 2020 until 30 September 2020 - 22.5% (standard corporate tax rate); and
- From 1 October 2020 until 31 December 2021- Exempt.