Taxation

The Taxation Department at the Egyptian Central Securities Depository (ECSD) is responsible for calculating, withholding, and remitting taxes on government debt instruments including Treasury bills, bonds, and other debt securities issued by the Ministry of Finance to the Egyptian Tax Authority (ETA). The department also ensures regular disclosures of these activities to the Ministry of Finance.

Calculation, Withholding & Remittance

• ECSD serves as the sole authority for withholding taxes on government debt instruments at source, whether upon coupon payments or during secondary market transactions.
• Daily tasks include monitoring tax flows, verifying deduction accuracy, and ensuring full remittance of due amounts to the ETA.

Implementation of Double Taxation Agreements (DTAs)

• In coordination with the International Treaties & Research Department at the ETA, ECSD applies preferential tax treatment under bilateral tax treaties between Egypt and foreign investors' countries of residence.
• Custodians, or their legal proxies, submit required documents to the ETA to obtain a technical opinion on treaty applicability.
• Upon receipt of formal approval from the ETA, ECSD implements the reduced or exempt tax rate immediately,

Tax Refunds for Foreign Investors

• Under the Memorandum of Understanding (MoU) between ECSD and the ETA, ECSD processes tax refunds through custodians once formal ETA approval is received.
• Refunds are calculated retroactively, covering the period from the effective date of approval until its expiry, using a strict mechanism to ensure precision and full compliance.

Issuance of Tax Certificates

•  ECSD issues tax certificates to market clients via custodians, reflecting taxes actually withheld from interest payments or trades.
• These certificates serve as official, regulatory-grade documentation for clients in their dealings with the ETA or other authorities.

A. Withholding Tax (on Interest Income)

• Levied at source on interest earned from government securities, whether by coupon payment or security redemption or trade execution.
• Rate: 20% for local or treaty-ineligible foreign investors.
• Treaty-eligible investors: May benefit from reduced rates or full exemption upon providing supporting documents and obtaining ETA approval.

B. Capital Gains Tax (CGT)

• Calculated on net gains realized in the secondary market, net of accrued interest.
• Rate: 10% applicable only to Egyptian resident investors.
• Execution: Tax is calculated but not withheld by ECSD.

Custodian Reports:

• ECSD’s automated system generates detailed reports for each custodian, outlining every taxable event (e.g., coupons, redemptions, trades) and the corresponding tax amounts and rates applied.

Ministry of Finance Reports:

• ECSD submits comprehensive reports to the Ministry of Finance, including all taxes withheld and remitted to the ETA, plus monthly summaries of refund payments made to foreign investors based on ETA approvals.

Tax Recalculation Reports:

• When retroactive preferential rates or exemptions are granted, ECSD recalculates the tax differential and issues detailed reconciliation reports, indicating the number of adjusted transactions, tax differences, and refund amounts.
• A statement is provided to the relevant custodian to facilitate final refund processing in favor of the investor.