Egypt issues sweeping amendments to VAT, income tax and tax procedures legislation

Reduced 5% rate widened
The 5% VAT rate now applies more broadly to machinery, equipment and medical devices used in producing goods or performing services (buses and passenger cars excluded). Equipment used for medical purposes is treated as a “medical device” for this purpose.

New VAT-suspension regime for capital equipment
VAT due on imported or locally purchased machinery, equipment and medical devices acquired by factories and production units can now be suspended for one year from the release/purchase date, extendable up to three years in total. If the equipment is confirmed to have been used in industrial production within that period, the suspended VAT is written off entirely. Disposing of the equipment for a non-qualifying purpose within five years of exemption will trigger the deferred liability, so asset-disposal decisions need a tax check first.

Input VAT credit refunds
A VAT credit balance outstanding for more than four consecutive tax periods must now be refunded; for SMEs qualifying under Law 6/2025 (annual turnover up to EGP 20 million), this threshold drops to just over three months — a meaningful cash-flow improvement.

Exempt goods and services expanded
The exempt list now explicitly covers butane gas, natural raw materials (excluding crude oil and natural gas), a wider range of medical and assistive devices (wheelchairs, prosthetics, hearing aids, dialysis equipment, incubators, sera, vaccines, blood products), National Post Authority financial services, and non-bank financial services regulated by the FRA or Central Bank. The real estate leasing exemption is also clarified: premises used as an independent head office for a business — even where commercial in nature — fall outside the exemption, other than premises used by religious, charitable, social, educational or health-related activities designated by ministerial decision.

• Bookkeeping obligation reaffirmed: all businesses carrying on a commercial, industrial, craft or
  professional activity must maintain regular accounting books (manual or electronic) under the
  Commercial Law — subject to the existing carve-out for small enterprises under Law 6/2025.
• New temporary tax card: businesses in the process of incorporation/licensing may now request an
  8-month temporary tax card from the Authority. Any liabilities arising during its validity fall due once
  the card expires, and it cannot be used to issue e-invoices or e-receipts — useful for groups setting
  up new Egyptian entities, but plan working capital accordingly.

Real estate disposal tax (Article 43)
The 2.5% tax on disposals of real property and building land is confirmed and its scope clarified to capture successive disposals, disposals by heirs, and disposals of land or built property held for the owner’s own use. Contributing real estate as in-kind capital to a joint-stock company remains exempt, provided the resulting shares are not disposed of for five years.

Capital gains on unlisted shares/securities
Non-resident sellers of unlisted shares or securities must self-assess and remit capital gains tax within 60 days of the transaction. Where disposal is at fair value, the acquisition cost is indexed using the Central Bank’s announced credit/discount rate for each year held, provided the holding exceeds three years. Non-residents remain exempt on gains from treasury bills.

Thin capitalization
Interest deductibility is restricted where related-party debt exceeds twice average equity, as before. A new 4-times-equity threshold applies to companies financing designated national infrastructure projects, subject to conditions including unrelated-party lenders and a minimum 25% project contribution. Banks, insurers and licensed financing companies remain outside these rules.

Dividend withholding tax
The 10% dividend withholding tax (5% for EGX-listed shares) is retained, with dividends between resident companies continuing to be excluded from the tax base. Profits of a non-resident’s Egyptian permanent establishment continue to be deemed distributed 60 days after financial year-end.

New 15% tax credit for EGX listings
Companies that list on the Egyptian Exchange via an approved prospectus can now claim a 15% credit against corporate income tax due for three years from listing, provided the market capitalisation at listing is at least EGP 50 billion and the free float is at least 20% of shares (or worth at least EGP 10 billion). The credit is available once only per company and cannot be combined with other tax incentives.

Simplified settlement for SMEs (2022–2025)
Businesses with annual turnover up to EGP 10 million can settle outstanding non-final tax assessments for periods from January 2022 up to early 2025 on a simplified turnover-based basis (tiered percentages/fixed amounts), rather than a full assessment — taxpayers may still elect the standard assessment route instead.

Other changes

• Bad-debt write-offs are eased: debts up to EGP 10,000 can be written off without formal collection proceedings, capped at 1% of the year-end debtor balance; larger debts require evidence of serious collection steps (payment order, first-instance judgment, or a bankruptcy claim).
• Unpaid capital gains tax on EGX-listed share disposals between 16 June 2023 and the new law’s effective date is waived.

The tax dispute settlement mechanism under Law 79/2016 is renewed until 31 December 2026. Clients with unresolved disputes — or considering settlement of new ones — have a further window to apply.

What we recommend

• Review capital expenditure and import plans to take advantage of the new 5% VAT rate and VAT-suspension regime on qualifying machinery and equipment.
• Revisit thin-capitalization and intercompany financing structures against the revised 2x/4x equity
  thresholds.
• Assess any planned real estate transfers, share disposals or corporate restructurings under the
  clarified Article 43 and capital gains rules.
• SMEs: evaluate whether the simplified 2022–2025 settlement basis is more favorable than a
  standard assessment.
• Groups incorporating new Egyptian entities: factor the temporary tax card into your setup timeline
  and cash planning.
• Clients with pending disputes: consider applying under the renewed settlement mechanism
  before 31 December 2026.

We would be glad to walk through how these changes affect your specific structure and operations. Please reach out to your usual Ecovis ElKadeem contact, or to the team below, to arrange a discussion