PwC: Egypt Eyes New Tax on Local Firms Profiting Abroad

Egypt Considers Taxing Foreign Revenue of Local Firms, Overhauls Tax Regulations

Egypt is exploring the taxation of local companies generating revenue from abroad, according to Sherif Shawky, Senior Partner for Tax in Egypt, Kuwait, and Libya at PwC. This initiative, aimed at ensuring fair tax distribution and safeguarding state revenue, comes as Egyptian companies increasingly expand into international markets. PwC has presented a comprehensive vision to the Egyptian government on implementing this initiative, while avoiding double taxation.  

Shawky emphasized the necessity for clear regulations to govern tax obligations, ensuring a fair distribution of the tax burden and preventing the loss of state revenues. He also highlighted Egypt's need to align with global tax frameworks, particularly the OECD's Pillar 2, which imposes a 15% global minimum tax rate on multinational companies to prevent profit shifting to low-tax jurisdictions.  

Regulatory Changes in Capital Gains, Real Estate, and Digital Taxes

The Egyptian government is actively reviewing and updating its tax regulations across various sectors. Proposed changes to real estate taxes could potentially triple revenues, surpassing EGP 24 billion, through facilitating tax payments and integrating informal sector businesses.  

Regarding capital gains tax, Shawky noted the challenges under Law No. 30 of 2023, which imposes varying tax rates on cash dividends from listed and unlisted companies. He highlighted the Egyptian Tax Authority's clarification in April 2024 that investors are exempt from capital gains tax on the disposal of listed securities. The authorities are now revising executive regulations to ensure a more equitable and transparent tax system, balancing tax compliance with investment incentives. Additionally, amendments to stamp tax provisions are being considered to align with economic and legislative developments.  

Digitization and Taxation of the Digital Economy

Egypt is also focusing on modernizing its tax system through digitization. Shawky stressed the importance of modernizing the customs system and electronically linking it to the Ministry of Finance's tax system to improve efficiency and reduce tax evasion. The government is considering new tax collection measures, including amendments to stamp duty and custom taxes, and automation to expand the tax base and simplify compliance.  

The rapid growth of the digital economy, with companies like YouTube, Uber, Netflix, and Talabat relying on digital platforms, necessitates a reformulation of the tax framework. Shawky argued for strengthening mechanisms to track digital revenues, adopting electronic payment solutions, and developing data analysis tools to ensure accurate taxation of e-commerce revenues.  

Furthermore, with the rise of cryptocurrencies, PwC has identified the need for a tax framework to govern digital asset transactions. Although cryptocurrencies are not yet officially authorized in Egypt, regulations are under development.  

In summary, Egypt is actively pursuing tax reforms to enhance revenue collection, ensure compliance, and create a stable investment environment, while also aligning with global tax standards and adapting to the evolving digital economy.