Egypt's 2024 tax updates: Key changes and benefits

In 2024, Egypt is implementing significant updates to its tax system to address economic challenges and support low- and middle-income earners. These changes aim to mitigate the effects of inflation and promote social justice. Here are the key highlights of the new tax measures:

Raising the Zero-Tax Bracket

Egypt is considering regular reviews to increase the "zero-tax bracket" to keep pace with inflation rates. This adjustment aims to ease the tax burden on low- and middle-income workers in both the public and private sectors. The goal is to ensure that those who earn the least are protected from the full impact of inflation.

New Income Tax Bill

The new income tax bill will not raise income tax rates for any bracket. Instead, it will restructure salary tax brackets to provide relief for low- and middle-income earners. The bill also aims to define taxable incomes more clearly, simplify the tax system, and improve tax certainty.

Progressive Tax Structure

The updated tax system introduces a progressive tax structure for incomes exceeding 55,000 Egyptian pounds. Here’s how the new rates break down:

• 40,001 to 55,000 EGP: 10% tax
• 55,001 to 70,000 EGP: 15% tax
• 70,001 to 200,000 EGP: 20% tax
• 200,001 to 400,000 EGP: 22.5% tax
• 400,001 to 1.2 million EGP: 25% tax
• Above 1.2 million EGP: 27.5% tax

This progressive approach ensures that higher income earners contribute proportionally more, supporting social equity.

Unified Payroll Tax System

Egypt has introduced a unified payroll tax system that electronically calculates taxes on salaries and wages across all sectors without human intervention. This system enhances accuracy and fairness, helping to avoid unrealistic tax assessments and supporting the recent increase in the tax exemption limit.

Special Exemptions and Incentives

To support economic growth and attract investments, the government has introduced several incentives:

• Strategic Industrial Projects: Exempt from certain taxes for five years, with the possibility of recovering up to 50% of the land and investment costs if completed within a specified timeframe.
• Green Hydrogen Projects: An "investment incentive" of 33% to 55% of the tax due on profits earned.
• Mobile Phone Manufacturing: Customs exemptions on most parts and components, reducing customs tax to a maximum of 2%, down from 20-30%.

Support for Industrial and Export Sectors

The government has allocated significant funds to stimulate economic activity, particularly in the industrial sector. This includes:

• Electricity Price Reduction: Annual cost reduction for industrial electricity prices by 6 billion pounds.
• SMEs Incentives: 1.5 billion pounds in cash incentives.
• Automobile Industry Support: 500 million pounds to support the strategy.
• Real Estate Tax Incentives: 1.5 billion pounds annually until 2026.

Conclusion

Egypt's 2024 tax system updates are designed to provide financial relief to low- and middle-income earners, support economic growth, and attract local and foreign investments. By raising the tax exemption threshold and introducing a progressive tax structure, the government aims to ensure social justice and economic stability. These measures, coupled with incentives for strategic industries, demonstrate Egypt's commitment to fostering a prosperous and sustainable future.