Egypt has unveiled a second package of tax reforms aimed at simplifying procedures, rewarding compliant taxpayers, and enhancing investor confidence, as the government advances its broader effort to modernize the country’s tax system and expand its formal economic base.
The measures come amid a longstanding challenge: Egypt’s business sector has historically been marked by informality and strained relations with tax authorities. By focusing on administrative simplification, digitalization, and incentives for compliance, policymakers hope to reshape the state-private sector relationship while broadening the tax base in a sustainable way.
A new phase of tax reform
Announced during the Prime Minister’s weekly press briefing in the New Administrative Capital on December 15, the package—titled “Supporting and Incentivizing Tax Compliance”—is the second of four planned reform phases. Finance Minister Ahmed Kouchouk explained that it builds on progress from the first phase and aims to foster a partnership with taxpayers based on trust, certainty, and voluntary compliance.
The package is also open for public consultation, allowing businesses to provide feedback before the reforms are finalized.
Seif Allah El Khawanky, country director of the Center for International Private Enterprise (CIPE), said the reforms signal a broader shift in Egypt’s fiscal approach.
“The first and second phases reflect a move away from the traditional focus solely on revenue collection toward a framework that emphasizes investment facilitation and a constructive partnership with the private sector,” El Khawanky said.
He noted that reform efforts are occurring against decades of mistrust between businesses and tax authorities. “For economic, institutional, and even cultural reasons, informality remains deeply embedded in Egypt’s economic structure,” he said, stressing that registration alone does not equal full formalization.
Encouraging SME participation
A key goal of the reforms is to bring small businesses and informal enterprises into the formal system. Businesses with annual revenues up to EGP 20 million remain eligible for a simplified tax framework introduced in the first phase.
The Ministry of Finance is coordinating with the Micro, Small and Medium Enterprise Development Agency to enroll the first 100,000 taxpayers in the simplified system, while partnering with the Ministry of Communications and IT to support entrepreneurs entering the formal economy.
Consultations have been extensive. “More than 40 private sector sessions shaped the package,” El Khawanky said. He added that voluntary disclosure initiatives have already yielded results, with over 600,000 taxpayers submitting new or amended declarations, generating roughly EGP 80 billion in revenues and formalizing nearly EGP 1 trillion of previously unreported economic activity.
Incentivizing compliance
The second reform package introduces a “white list” of compliant taxpayers, offering businesses that meet obligations consistently priority access to tax services and faster administrative procedures. VAT refunds, for example, will now be processed within one week for companies on the list.
During FY 2024/2025, Egypt issued EGP 7.2 billion in VAT refunds—a 151% increase over previous periods. El Khawanky said the white list could reshape compliance culture by recognizing highly compliant taxpayers and offering tangible benefits rather than increased scrutiny.
Administrative and digital reforms
The package also includes measures to simplify tax procedures and modernize administration. These include renewing the tax dispute settlement law for faster resolution, strengthening internal review committees, separating commercial tax audits from transfer pricing audits, and adding a stage for reviewing taxpayer appeals.
Digitalization is central to the reforms. Specialized tax service centers with advanced digital services will open in New Cairo, Sheikh Zayed, and New Alamein. Additionally, a digital consultation platform and a mobile app for real estate transactions will allow taxpayers to report and pay property taxes electronically.
“Digital tools also reduce opportunities for noncompliant behavior by making informal practices easier to detect,” El Khawanky said.
Supporting investment and capital markets
The package also targets capital markets and corporate efficiency. The government plans to replace capital gains tax on stock market transactions with a stamp tax to encourage institutional investment, and introduce incentives for companies listing on the Egyptian Exchange for three years.
Legislative amendments will exempt dividend distributions between Egyptian subsidiaries and resident holding companies, eliminating cases of double taxation. “This improves corporate efficiency and positions Egypt as a more attractive holding company jurisdiction,” El Khawanky said.
Implementation: The real test
While the reforms signal positive momentum, El Khawanky emphasized that implementation will determine their ultimate success. “Egypt has no shortage of legislation or policy announcements. The challenge is translating these commitments into smoother day-to-day operations,” he said.
He added that effective execution will require stronger institutional capacity, improved interagency coordination, and continued engagement with the private sector. “These measures send positive signals, but trust—not just incentives—is what ultimately attracts investment,” he concluded.
