Capital gains confusion sparks court case in Egypt

Egyptian investors yesterday challenged the government in court over a tax on stock dividends and capital gains, saying it is causing confusion and hampering investment.

Traders say the market still doesn’t understand how the tax will be calculated or collected, adding to uncertainty aroused by an indefinite delay to parliamentary elections. The stock market hit a fourmonth low in early trade.

The head of the Egyptian stock exchange complained the tax rules were too complicated and fund managers called them burdensome.

President Abdul Fattah Al Sissi approved the law, which imposes a 10 per cent tax on capital gains and dividends, last July as part of efforts to overhaul an economy battered by years of political turmoil.

But the “executive regulations”, which stipulate how the law will be applied, were not published until earlier this month and investors say they leave many ambiguities.

Finance Minister Hany Kadry Damian has estimated that the stock market tax would raise between 3.5 million and 4.5 million Egyptian pounds ($460,000 and $590,000 or between Dh1.67 million and Dh2.15 million). Profits from stock market transactions in Egypt were previously tax-free.

The Egyptian Association for Financing and Investment Studies, representing stock market investors and traders, filed a lawsuit in an administrative court demanding changes to some articles of the law, Mohsin Adel, deputy head of the association, told Reuters on Tuesday.

Adel, a member of the Egyptian Stock Exchange (EGX) board and an advisory economic council for the presidency, said on his Facebook page that the lawsuits were filed due to the government’s “failure to respond” to the issue.