Egypt charts course for business growth with raft of tax initiatives

Recognising the crucial role that SMEs play in economic development – creating job opportunities, fostering innovation, and contributing to GDP – the Egyptian government has taken proactive steps to eliminate tax-related barriers that hinder their growth. These measures aim to alleviate financial burdens, enhance business stability, and integrate the informal economy into the formal sector.

In line with this commitment, the Ministry of Finance, in collaboration with the Egyptian Tax Authority, has introduced a package of tax relief initiatives, some of which apply to SMEs and others which apply to all taxpayers, as relevant. These reforms have been enacted through three new laws that were officially published in the Official Gazette on February 12 2025.

Law No. 5 of 2025 provides an opportunity for unregistered taxpayers to register within three months of its enactment without being held accountable for prior tax periods. The exemption applies only if no prior tax procedures had been initiated against the applicant before the law came into effect. To complete the registration process, taxpayers must submit all required documents through electronic tax platforms.

Taxpayers can submit overdue tax returns for previous periods since 2020 without incurring penalties.

Furthermore, tax returns can be amended without being subject to delay fees or additional taxes for the period between the original and amended submissions.

Taxpayers that have undergone deemed assessments by the Egyptian Tax Authority for tax periods ending before January 1 2020 can request the settlement of tax disputes by paying 30% of the due tax as per the tax return for each disputed period. Alternatively, they can pay an amount equal to the tax due based on the last prior agreement on the disputed period(s), plus 40% in certain cases.

Taxpayers with tax periods under audit based on orderly books and accounts before January 1 2020 can submit a request to settle disputes for these periods under any stage of controversy. In exchange, the Egyptian Tax Authority will waive (100%) the late-payment fees or the additional tax and additional amounts, provided that the taxpayer pays the full principal amount of the tax within three months from the date of submitting the dispute settlement request.

The dues can be submitted in quarterly instalments without interest, while there is an exemption from previous tax penalties when complying with the new tax return requirements. To benefit from this mechanism, persons or taxpayers must submit a request to the tax authority to settle the disputes within three months from the date of the law’s enactment.

Individuals who have conducted real estate disposals or disposed of unlisted securities on the stock exchange, and do not engage in any other income-taxable activities, during the past five years are allowed to settle the due taxes and benefit from an exemption from late payment fees.

Law No. 6 of 2025 applies to businesses with annual revenues not exceeding EGP20 million, including professional activities. Eligibility includes tax-registered and non-registered businesses at the time of the law’s enactment.

Revenue is determined based on multiple criteria, including:

• The latest final tax assessment for registered businesses; and

• The most recent filed tax return for businesses that have not yet been taxed.

To ease the financial burden on SMEs, the law grants several tax exemptions, including:

• Exempting businesses from establishment fees, documentation fees, and stamp tax;

• Exempting capital gains resulting from the sale of fixed assets or production equipment from taxes; and

• Exempting dividend distributions from taxes imposed on income profits.

The law specifies taxes ranging between 0.4% and 1.5% as a percentage of the turnover, depending on the turnover volume. The business continues to benefit from the provisions, even if its turnover volume increases once by up to 20% within five years.

Businesses covered under this law shall have an independent form for the annual tax return for their commercial, industrial, or professional activities.

The following legal obligations must be adhered to:

• Adoption of the e-invoicing and e-receipt systems; and

• Maintaining simplified accounting records, with an exemption from traditional bookkeeping requirements.

As part of Egypt’s ongoing tax reform efforts, Law No. 7 of 2025 introduces amendments to Law No. 206 of 2020 on Unified Tax Procedures. These changes aim to enhance tax compliance, provide clearer legal frameworks, and create a fairer taxation system for businesses and individuals.

The law establishes a maximum limit on late-payment penalties and additional taxes, ensuring that they do not exceed 100% of the original tax liability.

Tax offences can now be settled out of court by paying compensation ranging from half the minimum fine up to twice that amount, provided the settlement occurs before criminal proceedings begin.

A settlement after a final court ruling is also possible, requiring compensation equivalent to four times the minimum fine.

These new laws reflect Egypt’s commitment to supporting SMEs while creating a more business-friendly tax environment. By simplifying tax procedures and offering attractive incentives, the government aims to attract more investments, enhance tax compliance, and drive economic growth.