Ministry of Finance Decree No. 172 of the year 2015 Amending Some Provisions of the Executive Regulations of the Income Tax Law
promulgated by the Minister of Finance
Decree No. 991 of the year 2005
Article (55):
The exemption stipulated in clause (7) of Article (50) of the Law regarding the profits and dividends of mutual funds in securities shall apply on the condition that such mutual funds are established in accordance with the Capital Market Law No. 95 of the year 1992 and its Executive Regulations, and within the provisions regulating such funds.
Article (60):
In applying the provision of paragraph (a), clause (2) of Article (52) of the Law, the following rules shall be observed when determining loan provisions which are considered as deductible costs:
1- The amount of loan provisions used to cover bad debt occurred during the year shall be determined. If the amount used exceeds the (80%) which is included in deductible costs, the amount in excess shall be deducted from the formed provisions that have been subjected to the tax.
In all cases, the excess amount, referred to above, shall be deducted first from those provisions which have not been subjected to the tax.
2- Amounts to be recovered from loans previously written off, shall be added to the taxable base, if such loans have been previously approved as bad debt. For those loans that have been treated according to the provisions of the Law, 80% of the amounts recovered therefrom shall be added to the taxable base.
The value of retained interest shall be added to the taxable base, as well as the amounts recovered from interest in suspense. Retained interest written off shall be deducted, and interest in suspense may not be added to base.
Article (61):
In applying Article (53) of the Law, capital gains resulting from revaluation, including holding gains, shall be taxable in the event that the legal form of the juridical person is changed. The juridical person may defer the tax on the following conditions:
1- The assets and liabilities are recorded at their book value at the time of change of the legal form;
2- Depreciation of assets are computed and provisions and reserves are carried forward according to the rules established for the book values of assets and liabilities before the change of the legal form;
3- Shares or stocks resulting from the change of the legal form are not disposed of during the three years following the date of change of the legal form; and
4- No party to the change of the legal form is a non-resident person,
Without prejudice to the provisions of the present Article, a bargain shall be deemed an acquisition in applying the provisions of clauses (4 and 5) of Article 53 of the Law, if the value of purchased shares is 33% or more in the tax period.
Article (63):
For the purpose of tax computation as per Article (53) of the Law, the company shall maintain financial statements, as well as statements and a register displaying the book values of assets and liabilities before the change of the legal form.
A follow up should be conducted on the revaluation differences resulting from the change of the legal form of the juridical person. Tax treatment shall be as follows:
1- In case of disposal of fixed assets: capital gains realised from any kind of disposal of the assets that have been previously evaluated, including depreciation, or acquisition of assets, which are provided for in clauses (1), (2), and (4) of Article (25) of the Law, and which result from disposal of such assets, shall be taxable. Computation shall be based on the difference between their book value before the change of the legal form and the value of disposal thereof;
2- For assets prescribed in clause (3) of Article (25) of the Law, their depreciation shall be computed based on their book value before the change of the legal form. In case of disposal thereof, assets shall be treated as per the provisions of Article (26) of the Law;
3- Follow up of reserves and provisions movement shall be conducted based on their balances before the change of the legal form. The amount of increase in their balances emanating from revaluation differences shall be taxable. However, this shall not apply to the differences resulting from the revaluation prescribed in clauses (1) and (2) of the present Article, which were previously subjected to the tax in case they had been included in reserves; and
4- Profits realized upon liquidation. This shall be realized if no change occurs in the value of the company’s assets after the legal form has been changed, as the case in the cost of lands. In this event, profits resulting from these assets shall be taxable on liquidation.
