House gives its final nod to tax hikes, income tax changes: MPs gave their final approval yesterday to a fresh batch of tax amendments — raising the threshold for income tax exemption and introducing a raft of tax, duty, and development fee hikes.

New taxes? Among the changes are a 5-20% ‘entertainment tax’, new fees on duty-free products, a stamp tax hike on ins., and a 10% development fee on a number of imported luxury goods. Check out our coverage last week for the full details.

The final approval came despite opposition: A number of leftist and liberal MPs rejected thebills on Sunday, saying that they will add further financial burdens on the public and contradict the investment-friendly climate the government is trying to set up.

REMEMBER- The tax hikes have been in limbo since December 2021 when the Madbouly government pulled it from the House following its rejection by the House General Assembly.

The impact on the public purse: The tax amendments will bring in EGP 25 bn in revenues a year, a Tax Authority source told Enterprise.

INCOME TAX-

A tax break for lower earners: Changes to the income tax law will raise the personal tax exemption threshold to EGP 36k from EGP 24k, lowering the tax burden for as many as 22 mn low- and middle-income earners. You can find the breakdown of the new tax bands here.

The new higher rate band won’t affect as many as previously thought: The changes will introduce a new 27.5% higher rate of tax for people earning more than EGP 1.2 mn a year. The higher tax rate was initially expected to impact those making over EGP 1 mn a year but Finance Minister Mohamed Maait agreed to raise the threshold upon a request from independent MP Diaa Eldin Dawoud. “As the EGP lost much of its value against the USD last year, it would be reasonable to introduce the new tax rate for people who earn a monthly EGP 100k,” Dawoud said.

The cost to the state budget: EGP 6 bn. “These new legislative amendments will reduce tax receipts by EGP 6 bn, but we are ready to bear this cost because it aims to serve the interests of low and average-income citizens," said Finance Minister Mohamed Maait. Raising the income tax threshold will cost around EGP 10 bn, EGP 4 bn of which will be offset by the new higher rate of tax, said Deputy Finance Minister Rami Youssef.

Boost for small businesses: The amendments will allow small businesses with annual revenues of less than EGP 10 mn to be granted a flat-rate tax treatment and grant individuals who file under the new e-invoicing system an incentive worth 5% of their annual tax bill. We have more details in our coverage earlier this week.

CAPITAL GAINS TAX-

Tax cut on shares of newly-listed companies: In a bid to incentivize subscription to IPOs, investors will be charged the 10% capital gains tax on only 50% of the realized gains made from selling shares in newly-listed companies. This will fall to 25% two years after the passage of the legislation.

Expanding the umbrella of CGT: Income made from investments in venture capitals, real estate investment funds, holding companies and or equity funds are now subject to a 5-15% CGT.

REMEMBER- A 10% capital gains tax on EGX transactions was supposed to be introduced in January 2022 for resident investors but was later delayed by the Finance Ministry pending the passage of the Income Tax Act amendments. Investors will pay the tax on net portfolio earnings calculated at the end of the tax year, minus brokerage fees.

WHAT’S NEXT- The bill will be passed to President Abdel Fattah El Sisi to sign into law.

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