It looks increasingly likely that the long-awaited capital gains tax on EGX transactions may never come, with the government holding intensive discussions to resolve the issue — and even look for alternatives, a government source told EnterpriseAM. The tax that was supposed to come into play in December has continued to be unenforced due to the absence of executive regulations, the source told us.

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In its place, officials are now considering reinstating a 0.15% stamp tax on all EGX transactions as a simpler alternative to the capital gains tax, which has been repeatedly delayed. There’s already an agreement between the EGX and the Financial Regulatory Authority about how to activate the stamp tax using the collection mechanism previously in place, the source said. Under the proposal, Misr for Central Clearing, Depository, and Registry would collect and remit the tax to the Tax Authority at a flat rate of 0.15% on all transactions — regardless of portfolio size or holding period.

A return to a stamp tax has been in the cards for a while now, with a senior government source telling EnterpriseAM last September that officials were studying alternatives to taxing EGX capital gains, including imposing a stamp tax. Senior figures in the cabinet, including Investment Minister Hassan El Khatib have also on several occasions raised concern that the incoming tax could be detrimental to the country’s investment climate.

Proponents of the stamp tax think it has some important advantages over the capital gains tax, including our source, who explained to us that reintroducing the stamp tax instead of the capital gains tax would encourage investors to hold stocks for longer rather than making short-term trades to minimize tax exposure. The latest iteration of the capital gains tax calculated liabilities based on the total value of an investor’s portfolio, prompting companies to offload shares at year-end to reduce taxable gains.

Refresher: A 10% capital gains tax on EGX transactions was supposed to be introduced inJanuary 2022 for resident investors, but was later delayed. The tax has since undergone a number of different amendments and reviews, before the Madbouly government started mulling over replacing its plans to tax EGX capital gains with the flat 0.15% tax.

What’s next? The government plans to finalize the collection mechanism and submit draft legislation to the House soon to avoid disrupting the upcoming corporate tax filing season, which ends on 30 April, our source told us.

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