Ensuing the global outbreak of the COVID-19 pandemic, the global economy has witnessed mass disruptions in various economic sectors with surging levels of uncertainty.
This led to a relapse in the performance of financial markets and a depreciation in GDP forecasts despite the deployment of catalysts approaches by major economies to avoid recession. Striked by the outbreak, the Egyptian economy faced a slump in international imports, especially Chinese imports, along with a great affliction in its key sectors such as tourism, education, and FMCG. In response to COVID-19, the Egyptian government has promptly taken health and economic measures to alleviate the spread of the pandemic as well as reducing the economic strains.
Corporate and Social Environment Mitigating Measures:
To combat the crisis in an effective and timely manner, the Prime Minister issued a decree on March 24th, 2020 to suspend all in-person government-to-citizen services with some services available through digital portals. In the same announcement, the Prime Minister extended the curfew on malls, restaurants, cafes and other recreational outlets from 5 p.m. to 6 a.m. (excluding supermarkets, bakeries, pharmacies and home delivery services); imposed a curfew on citizens from 8 p.m. to 6 a.m.; and suspended all public and private mass transportation nodes during the curfew.
Furthermore, in line with the decree, local businesses and multinationals have adopted new policies to preserve their staffs’ health and welfare while maintaining operations at minimal losses. These include teleworking, reduced staffing on premises and paid sick leave. As for factories and other production-oriented businesses that require employees’ physical presence, social distancing strategies are being implemented by reducing shift hours and work weeks, and replacing onsite meal services with cash stipends.
Fiscal and Legal Mitigating Measures:
The Egyptain government has issued a number of new/temporary fiscal reforms to maintain economic stimulation, minimize tax burdens, and reduce health concerns. Here are some of the tax and legal measures to support the businesses and the financial market:
Real estate tax payment settlements for industrial and tourism companies have been given a six-month tax break. In addition, companies will also be allowed to settle existing real estate tax liabilities in monthly installments until September 2020.
Reducing the stamp tax on EGX transactions to 0.125% (from 0.15%) for foreign investors and 0.05% (down from 0.15%) for local investors. All spot transactions on the EGX will also be exempt from the stamp tax.
Capital gains tax on stock market transactions have been postponed until January 1, 2022, and permanently exempting foreign investors from the duty.
Cutting tax on dividends by 50%. Investors will now pay a withholding tax of 5% (down from 10%) on dividend payouts from listed companies.
The Egyptian Ministry of Finance has issued a decree requiring VAT registrant taxpayers to issue electronic invoices, including the following: electronic signature of the invoice issuer (i.e. the supplier or the service provider) and the unified code of the relevant good and/or service, as pre-approved by the ETA.
Extending the deadline for personal tax filings until mid-April and waiving e-payment fees for online payments. The Egyptian Tax Authority is looking into postponing the filing deadline for auditors and businesses, specifically SMEs.
The General Authority for Investment and Free Zones ("GAFI") has recently issued a decree which permits local companies (incorporated pursuant to laws no. 159 of 1981, and no. 72 of 2017) to hold their board of directors' meetings, ordinary general meetings, as well as extraordinary general meetings, by means of conference calls and/or video calls whereby companies will be required to record their meetings and submit the evident CD(s) that include such records, to GAFI.