Egypt is preparing to introduce optional Tax Sukuk that individuals and legal persons can use to settle future tax liabilities, with subscribers receiving a tax-exempt return. Detailed rules for the scheme are expected by 31 August 2026.
Egypt is preparing to introduce an optional Tax Sukuk that taxpayers can subscribe to and later use to settle future tax liabilities, as the government seeks to raise domestic liquidity and encourage tax compliance.
The Egypt Tax Authority (ETA) said both individuals and legal persons will be able to subscribe to the instruments and receive a tax-exempt return. The amount invested and the return earned may subsequently be used to settle future tax liabilities.
Implementation details
The Ministry of Finance is expected to issue detailed rules and procedures within three weeks, with further details on the initiative expected by 31 August 2026.
The rules are expected to cover the volume of issuances, maturities, returns and mechanisms for using the Tax Sukuk to settle future tax obligations.
The proposed mechanism is based on Article 115 of the Income Tax Law No. 91 of 2005, which states: “The Minister may issue tax sukuk in which taxpayers subscribe, carrying a tax-exempt yield determined by the Minister. These sukuk and the returns due on them shall have the power of discharge when paying the taxes due.”
Proposed structure
The Ministry of Finance has proposed four denominations of Tax Sukuk: EGP 10,000, EGP 100,000, EGP 1 million and EGP 10 million.
Taxpayers would be able to use the Sukuk to settle outstanding tax liabilities after one year from the subscription date. The return, which would be tax-exempt, would be determined by the Minister of Finance and added to the principal when the Sukuk is used for tax settlement.
The government is expected to set an overall ceiling for issuances and introduce the programme gradually through annual issuances to limit its impact on future tax revenues.
Financing needs
President Abdel-Fattah Al-Sisi approved the proposal as part of efforts to meet the state’s financing needs and reduce debt-servicing costs. The budget deficit for fiscal year 2026-2027 is estimated at about EGP 1.2 trillion, equivalent to 4.9% of GDP.
The proposal would allow the state to receive funds from taxpayers upfront while giving subscribers an instrument that can later be used against their tax liabilities.
A government official cited by Enterprise reportedly put the potential issuance target at EGP 50 billion to EGP 100 billion. However, the presidential approval did not specify the launch date or total volume of Tax Sukuk.
Concerns over liquidity
The mechanism has also prompted concerns that companies could divert available liquidity towards Tax Sukuk instead of investment, production and expansion.
Capital markets expert Issa Fathi also warned that bringing forward future tax revenues to meet current financing needs could put pressure on Egypt’s credit rating and reduce tax revenues available in future years.
The ETA said Tax Sukuk form part of wider tax-facilitation measures intended to encourage voluntary compliance and provide additional benefits to compliant taxpayers.
