Egyptian Companies Take Steps to Avoid Dividend Tax

January 7, 2016 Taxation in Egypt

CAIRO – Egypt’s new tax on dividends is facing a grim future, as companies take steps to circumvent the measure.

Publicly listed companies in Egypt are increasingly opting to forego issuing dividends, in favour of bonus shares, in an effort to bypass the government’s recent tax on cash dividends.
As of July 2014 all cash dividends made by a publicly listed company in Egypt are subject to a tax of 10 percent.

The tax was intended to broaden the government’s tax base, and raise tax collections, following a period of political turmoil.

However, as over the course of 2015 the cumulative value of the cash dividends issued by the companies dropped by 28 percent in comparison to the level of dividends in the previous year, reaching a level of only EGP 9.83 billion, compared to EGP 13.59 billion.

As the dividends have dropped, the issue of bonus shares rose by 124.5 percent compared to the previous year, with a total value of EGP 4.51 billion.

Some experts have already come forward to claim that the tax will be dropped entirely in the near future, as it has failed to raise any appreciable tax revenues while also posing noticeable impediments to normal business activity.

Photo By: Andreas Poike