Applying stamp duty to bonds, M&A is no surprise to Egyptian market

Applying stamp duty to bonds, M&A is no surprise to Egyptian market
The Egyptian Exchange - (Photo Credit: Arabianeye-Reuters)

Cairo - Mubasher: A number of stock markets and brokerage experts in the Egyptian market said that it is normal for the stamp duty tax to be applied on stocks, bonds, as well as over-the-counter mergers and acquisitions (M&A).

However, some requested lowering the rates to reduce the negative effects on the Egyptian Exchange's (EGX) daily trade.

The chairman of the Egyptian Financial Supervisory Authority (EFSA), Sherif Sami, said that the decision is not surprising since M&As are among the capital market transactions, noting that it would have been a different case if a higher rate was imposed on these deals, which was not announced by the Ministry of Finance (MoF).

Misr for Central Clearing, Depository and Registry (MCDR) will not have to activate new systems, as the stamp duty is calculated in a simpler way as opposed to the capital tax.

The tax will be imposed on all listed and unlisted papers whether they are shares or bonds or over-the-counter, deputy minister of finance for tax policies Amr Al-Mounir told Reuters on Monday.

Mohamed Fathallah, the managing director of AT. Brokerage, and board member of MCDR, told Mubasher that the decision comes in line with the MoF's purpose of widening the base and increase the tax returns.

The M&A tax will not affect the trading activity of foreign investors, he added, noting that it will have negative implications on local investors, especially those who dominate the biggest share in daily trade.

Traded values at the EGX skyrocketed after the Egyptian pound's flotation in November, reaching a daily average of EGP 2 billion. However, after it was revealed that the MoF plans to apply the stamp duty tax to the capital market, traded values declined, reaching an average of EGP 1 billion per day.

The head of the brokerage sector at Mubasher International, Ihab Rashad, said that including bonds comes in response to demands of the stock markets associations, which saw a necessity of unifying taxes on both stocks and bonds, since the latter has an observable share in daily trade.

Rashad also recommended setting a maximum limit for the tax at 0.1% for two years, adding that it could be maintained at 0.125% for bonds and M&As, but for the stocks a lower rate is needed to avoid affecting daily trade volumes.

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Source: Mubasher Exclusive

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