February 23, 2017 / 11:22 AM / 6 months ago

UPDATE 2-Egypt seeks tax on share trades - finance ministry official

(Adds stock market reaction, economist comments)

CAIRO, Feb 23 (Reuters) - Egypt's Finance Ministry is recommending a tax on stock exchange transactions of 0.2 percent on both sellers and buyers, a senior ministry official told Reuters on Thursday.

The official said he expected the stamp duty to come into effect before May and to generate revenue of 1 billion to 1.5 billion Egyptian pounds ($63 million to $94.5 million) in 2017/18.

"We will send the income tax law amendments in early March to parliament, and they will include imposing a stamp tax on bourse transactions of 4 pounds per 1,000, which will be 2 pounds per 1,000 on the seller and 2 pounds per 1,000 on the buyer," the official said.

"We are targeting implementation of that tax before next May," he added.

The EGX 30 main index fell by 1.34 percent after the news, but economists said investors would take it well, having expected, and priced in, a higher tax rate.

"The stamp tax of 0.2 pct is definitely below market speculation of 0.4 to 0.5 percent, so this is more of a relief for the market, which had been pricing in a much higher rate, said Allen Sandeep, head of research at Naeem Brokerage in Cairo.

"While this is an acceptable rate for an emerging market like Egypt, deferment of the tax charge would still be the ideal scenario, given the (current) emphasis on attracting foreign capital," he added.

Egypt imposed a stamp duty on buyers and sellers in May 2013, collecting more than 350 million Egyptian pounds ($18.77 million) in revenue before the levy was replaced in July 2014 by a 10 percent capital gains tax.

Egypt suspended the capital gains tax in May 2015 for two years, under pressure from investors. They said it was discouraging business just as Egypt was struggling to recover from a plunge in confidence after a 2011 uprising and subsequent political upheavals.

The Higher Investment Council last year extended the suspension of capital gains tax for three years, until 2020 as part of efforts to draw investors back.

More than 270 companies are listed on the Egyptian stock exchange and more than 500,000 investors are registered to trade there.

$1 = 15.8700 Egyptian pounds Reporting by Ehab Farouk and Ahmed Aboulenein; Writing by Asma Alsharif; Editing by Mark Trevelyan and Gareth Jones

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