The Egyptian Ministry of Finance (MoF), in alignment with its comprehensive four-package tax reform strategy, has unveiled the second package of tax facilities and incentives.
This phase, titled “Stimulating Tax Compliance”, is designed to enhance voluntary compliance, support investment, and streamline tax procedures. Key measures include significant incentives for compliant taxpayers through a ‘Whitelist’ featuring immediate VAT refunds. Other measures include the reactivation of the Tax Dispute Resolution Law and targeted legislative amendments to support holding companies, capital market activity, national projects, and the separation of corporate tax audit procedures from transfer pricing (TP) audits.
Analysis Following the first package, which focused on building trust and integrating the informal economy, the second package marks a pivot towards establishing a framework for sustainable compliance. Incentives such as accelerated VAT refunds for Whitelist taxpayers and the replacement of capital gains tax on listed securities with a stamp tax indicate a more cooperative approach by the MoF. However, the practical impact of these measures will largely depend on how key details are addressed.
From a taxpayer’s standpoint, several questions remain open. The distinction between listed and unlisted companies continues to raise concerns, particularly in relation to capital gains taxation. In addition, greater clarity is needed around the criteria and ongoing requirements for inclusion in the Whitelist. Similarly, while separating TP inspections from corporate tax audits is a positive signal, taxpayers will be looking for clearer guidance on how this change will be implemented in practice.
Key pillars of the second package
The second package is structured around four main pillars, with specific actions under each.
Dispute resolution and procedural simplification
The package prioritises closing open disputes and aims to make tax procedures simpler and less time-consuming.
Incentive/measure | Description | Intended benefit to taxpayers |
Renewing the law | Renewing the application of Tax Dispute Resolution Law No. 79 of 2016 | Aims to provide an additional opportunity to settle outstanding tax disputes before legal proceedings |
SME dispute resolution | Issuing legislation to apply the flat/proportional tax system (Article 3 of Law No. 30 of 2023) to settle disputes for SMEs for the years 2023/2024 | Aims to achieve tax fairness and close a gap not covered by prior legislation |
Corporate audit and TP audit | Separation of corporate audit procedures from TP audit procedures, with the introduction of a new stage for reviewing taxpayer appeals on TP audit results | Aims to build trust between taxpayers and the Egyptian Tax Authority (ETA), simplify procedures, and reduce the need to resort to dispute resolution stages outside the ETA |
Real estate tax | Introducing a fixed 2.5% tax on the sale value of residential units by a natural person (if not considered a professional activity) via a mobile application | Aims to simplify and accelerate the payment of real estate disposition tax |
Legislative amendments | Amending the law to allow VAT credit refunds after three to four consecutive tax periods, instead of six | Aims to improve cash flow and liquidity |
VAT refund efficiency | Reviewing rejected VAT refund requests periodically | Aims to double the number and amount of VAT refunds |
Minimum bad debt | Setting a minimum threshold for small bad debts to be written off, exempting them from statutory legal procedures (amending Article 28 of Law 91 of 2005) | Aims to reduce administrative burdens for businesses |
Incentives for compliant taxpayers
The MoF is creating a Whitelist for the most compliant taxpayers, granting them preferential treatment and streamlining procedures.
Incentive/measure | Description | Benefit to taxpayers |
Whitelist creation | Establishing a list of highly compliant taxpayers | Aims to provide priority services, immediate VAT refunds (within one week of application, subject to criteria), and dedicated services |
Dedicated services | Creating a specialised hotline and issuing a Tax Excellence Card | Aims to provide faster processing of transactions, dedicated support, and priority access to specialised units (e.g., Advance Ruling Unit) |
Supporting investment and economic activity
Targeted legislative changes are proposed to promote investment, particularly in the capital market, for holding companies, and in major national projects.
Incentive/measure | Description | Benefit to taxpayers |
Holding companies (capital gains) | Exempting Egyptian holding companies from capital gains tax on the sale of non-listed securities or shares in Egyptian subsidiaries, subject to certain conditions | Aims to encourage corporate restructuring and investment centralisation in Egypt |
Holding companies (dividends) | Exempting dividends distributed by Egyptian subsidiaries to a resident Egyptian holding company, subject to ownership controls | Aims to ensure tax neutrality for Egyptian holding structures |
Capital gains tax | Transition in tax auditing for sales of listed securities from capital gains tax to stamp duty | Aims to simplify accounting procedures and facilitate the collection of taxes due on such transactions |
National projects | Allowing a deduction for loan interest paid to external financing entities by private sector companies participating in national projects (amending Article 56 of Law 91 of 2005) | Aims to facilitate access to finance and supports participation in strategic government initiatives |
Administrative efficiency and technology
Focusing on digital transformation to improve the taxpayer experience and service quality.
Incentive/measure | Description | Benefit to taxpayers |
Service centres | Launching new tax centres for distinguished services in New Cairo and New Alamein | Aims to improve service quality and accessibility |
Online consultation platform | Creating an electronic platform to publish drafts of new legislation, regulations, and guides, and receive feedback | Aims to enhance partnership with the business community and improve the quality of tax issuances |
Conclusion and actionable next steps
This second package of tax incentives represents a significant milestone in Egypt’s tax reform journey. At present, the MoF and the ETA are actively engaging with stakeholders to gather feedback and discuss implementation details before issuing the laws and regulations necessary to operationalise this package.
The following steps are recommended:
Whitelist qualification – review current tax compliance status and proactively address any outstanding issues to ensure qualification for the Whitelist upon its activation;
Dispute review – businesses with lingering tax disputes should urgently evaluate their position and utilise the renewed Tax Dispute Resolution Law to achieve closure;
Corporate structure review – Egyptian holding companies should analyse the new capital gains and dividend exemption rules to ensure their corporate structure is optimised to benefit from these new tax advantages;
TP compliance – multinational enterprises operating in Egypt must ensure full compliance in anticipation of updated TP audit procedures; and
Policy integration – update internal tax and accounting policies to align with the anticipated legislative changes, particularly concerning VAT refunds and bad debt write-offs.
