Egypt's tax authority is set to introduce tax bonds as part of a package of incentives aimed at building a strong partnership with taxpayers and the business community. The move is designed to enhance trust between the tax authority and taxpayers. According to Dr. Ragab Mahrous, advisor to the head of the Egyptian Tax Authority, the law governing these bonds has been in place since 2005 but is being reactivated due to its benefits for taxpayers.
The tax bonds are based on Article 91 of Law No. 91 of 2005. Dr. Mahrous explained that the goal is to change the concept of tax payment and build a partnership with the business community and taxpayers by providing incentives, primarily obtaining tax-exempt returns on subscription. This approach allows companies to avoid the cash flow strain of paying taxes upfront.
The primary objective of the law is to prevent cash outflows from companies during the tax return filing period. Taxpayers can use part of their available financial resources to subscribe to tax bonds instead of selling assets to secure liquidity for tax payments. By doing so, they can manage their tax liabilities more effectively.
Taxpayers can allocate a portion of their available funds to tax bonds, enabling them to plan for their tax liabilities and earn tax-exempt returns. This arrangement benefits both the taxpayer and the tax authority. The taxpayer earns a return while the tax authority secures the necessary funds for tax payments.
The first issuance of tax bonds is scheduled for the first half of November, after receiving feedback and proposals from taxpayers. The value of the issuance will be determined by the Minister of Finance, with expectations ranging between 30 and 50 billion Egyptian pounds. The initial issuance will be open to corporate taxpayers.
Subsequent issuances will be open to individual taxpayers. The tax bonds will be available in various denominations, ranging from 100 to 100,000 Egyptian pounds. The minimum subscription is 100 pounds, and the maximum is 100,000 pounds. Each taxpayer's subscription will be limited to 20-25% of their tax liability.
The subscription process will be facilitated through banks, and the Minister of Finance will issue the tax bonds based on the applications received. The first half of December will see an issuance for individual taxpayers, with returns becoming due in March. This approach provides taxpayers with greater flexibility in managing their tax obligations.
Key points
- The tax bonds will help alleviate the liquidity burden on companies during tax return filings.
- The bonds will be available in various denominations, ranging from 100 to 100,000 Egyptian pounds.
- The first issuance of tax bonds is scheduled for the first half of November.
