Egypt’s Ministry of Finance launched a tax reform initiative aimed at simplifying administrative procedures, expanding the taxpayer base, and creating a more supportive environment for businesses. The reforms were developed in collaboration with key stakeholders from the business community and focus on modernising the tax system without imposing new taxes or altering the existing tax structure.
The initiative seeks to streamline compliance, stimulate economic growth, and strengthen fiscal stability.
One of the central components of the reform is the introduction of a simplified tax system for small and medium-sized enterprises (SMEs) and startups. Businesses with annual turnovers of up to EGP 15 million will benefit from a fixed-rate tax system, which reduces complexity and compliance costs.
Projects must adhere to the tax authorities’ electronic systems (such as electronic invoicing and receipts) and submit their tax returns by the required deadlines.
Additionally, these businesses will be exempt from stamp duty, capital gains tax, and dividend distribution tax, and will have simplified income tax treatment along with quarterly VAT filings.
The first tax audit for these businesses will be deferred for five years after registration, and no retroactive tax claims will be made for newly registered entities.
The reform also includes the creation of a centralised platform, known as the Central Clearing System, which will streamline financial settlements for businesses. This system will cover tax debts, export support, and related obligations, simplifying processes for businesses to manage their tax affairs more effectively. Furthermore, the reform introduces a cap on late-payment penalties, ensuring that they do not exceed 100% of the original tax amount, providing more predictability and fairness for taxpayers.
In an effort to encourage voluntary tax registration, the reform allows new businesses to join the tax system without facing retroactive claims or penalties for prior years.
The tax reform also aims to streamline VAT refund procedures, with new measures designed to process four times more VAT refund cases annually. A dedicated unit will be established to handle tax-related pre-approvals, supported by automation and highly trained staff. In order to improve consistency, a centralised council will issue uniform tax rulings and guidelines, backed by a comprehensive principles guide.
Modernising the audit procedures is another key element of the reform. A sample-based audit system will reduce the need for exhaustive audits across all taxpayers, making the process more efficient. Additionally, the reform includes efforts to simplify tax declaration forms, with a move toward shorter forms and electronic submissions, which will make the filing process more user-friendly for businesses.
Overall, the tax reform initiative in Egypt is designed to enhance economic growth, foster a transparent and efficient tax system, and strengthen fiscal stability, all while reducing the compliance burden on businesses.
