In recent months, Egypt has undertaken a series of tax reforms designed to streamline the tax system and improve compliance for both individuals and businesses, part of efforts to enhance the country’s business climate and support economic growth.
On October 9, the Ministry of Finance launched the Tax Facilitation Initiative, a key reform aimed at simplifying tax procedures and alleviating financial burdens, particularly for small and medium-sized enterprises. The initiative seeks to resolve long-standing tax disputes, improve transparency, and encourage voluntary compliance—critical steps toward fostering a more efficient and investor-friendly economic environment.
“The first package of tax facilitation presents a valuable opportunity for all taxpayers—whether to reduce tax burdens, regularize their status, or resolve disputes. Every taxpayer should evaluate their position and take full advantage of the incentives offered in this package,” said Mohamed Elgarhy, Technical Assistant to the Deputy Minister of Finance for Tax Policy and Tax Reforms.
The first wave of reforms
To ensure the successful implementation of these reforms, the government has introduced mechanisms to monitor progress and address potential challenges. Elgarhy emphasized that the first wave of the initiative focuses on reducing obligations, simplifying procedures, and lowering tax disputes—key pillars for creating an attractive climate for investors.
As part of the reforms, Elgarhy highlighted that expanding the sample-based audit system is a crucial step in building trust between the Tax Authority and taxpayers. This system, which will now cover all tax centers, including those for large and medium taxpayers, selects only a portion of files for review based on risk-based criteria. Taxpayers whose files are not selected will have their tax declarations accepted without undergoing an audit, he explained.
The sample-based audit system is designed to streamline tax compliance by focusing audits on companies identified as higher risk while allowing the majority of businesses to have their tax submissions approved without a full review.
“Neutral parties will conduct evaluations and surveys to provide feedback on the efficient implementation of the package. Additionally, a monitoring system has been set up within the Tax Authority to ensure proper implementation and address any obstacles quickly,” he said.
Retroactive tax claims
To further ease the tax burden, newly registered businesses will be exempt from retroactive tax claims, and their first tax audit will be deferred for five years after registration, Elgarhy explained. Additionally, a new central clearing system will streamline financial settlements, making it easier for businesses to offset their tax obligations.
Another key provision is the capping of tax penalties at 100% of the original tax amount, ensuring businesses do not face excessive fines. According to Elgargy, these measures collectively aim to create a more transparent and business-friendly tax environment, encouraging compliance and fostering economic growth.
Tax dispute resolutions
The reform package also extends the Tax Dispute Resolution Law (Law No. 79 of 2016) until 2025, providing businesses with more time to settle outstanding tax disputes under a structured framework.
According to the Egyptian National Competitiveness Council (ENCC), other key measures include streamlining VAT refund procedures, accelerating audit processes, simplifying tax declaration forms, and unifying tax rulings to enhance clarity for taxpayers. Additionally, the reforms aim to improve pre-approval systems for tax-related matters, ensuring greater predictability for businesses.
Rasha Abdel Aal, Head of the Egyptian Tax Authority, stressed the government’s commitment to regulatory stability during the American Chamber of Commerce in Egypt’s (AmCham Egypt) Customs & Taxation Committee meeting on February 5. She stated that while only minimal amendments are needed, the implementation of recent tax reforms will proceed once Ministerial decrees and official decisions from the president of the Tax Authority are issued.
According to BDO Global, a key reform raises the threshold for submitting transfer pricing studies from EGP 15 million to EGP 30 million annually. This exempts taxpayers engaged in related party transactions below this threshold from the requirement to prepare and submit transfer pricing documentation.
A transfer pricing study assesses the pricing of transactions between a company’s subsidiaries or affiliated entities operating in different tax jurisdictions to ensure compliance with tax regulations.
Additionally, Abdel Aal highlighted that small business taxation has been a key focus of the reforms. The revenue threshold for small businesses has now been increased to EGP 20 million from EGP 15 million, further supporting their growth by reducing tax burdens and simplifying compliance procedures.
Transparent tax environment
As part of broader tax reform efforts, the Ministry of Finance aims to create a more inclusive and transparent tax environment. Elgarhy explained that the primary goal is to provide all taxpayers and investors, both registered and unregistered with the Tax Authority, a fresh start.
Unregistered investors who voluntarily register within three months from February 13, 2025, will be exempt from any tax liabilities for previous years.
Registered investors will have the opportunity to regularize their tax status for previous years, with simplified mechanisms to resolve tax disputes dating back to before 2020. They will also be able to submit missing tax declarations for 2020 to 2024 or amend previously submitted declarations with incorrect data, without facing penalties or fines.
The Tax Incentives Law No. 6 of 2025
When asked about the tax incentives in Law No. 6 of 2025 and their potential impact on SMEs, Elgarhy clarified that the law introduces a simplified and integrated tax system offering a comprehensive package of incentives and tax facilitations for all businesses with annual revenues not exceeding EGP 20 million.
According to Riad & Riad Law Firm, this includes exemptions from fees, duties, capital gains, profit distributions, and reduced income tax rates.
The firm also noted that the latest tax reforms in Egypt primarily target businesses with an annual turnover of up to EGP 15 million, offering significant financial and administrative relief. Under the new framework, these businesses will benefit from a fixed-rate tax system and enjoy exemptions from stamp duty, capital gains tax, and dividend distribution tax. The reforms also introduce simplified income tax treatment and allow for quarterly VAT reporting instead of monthly filings.
Under this system, businesses will calculate taxes as a percentage of annual revenue, simplifying tax obligations.
Elgarhy further stated that the new centralized tax clearing system aims to streamline offset procedures by allowing taxpayers to use their receivables from the Ministry of Finance and its affiliated revenue authorities—such as the Egyptian Tax Authority, the Real Estate Tax Authority, and Customs—to settle outstanding amounts owed to other state entities. This system is expected to significantly reduce the time and effort required for processing receivables and payments.
