10 facts about Egypt's new tax incentives

Egypt's Minister of Finance, Ahmed Kouchouk, recently announced a series of tax incentives aimed at boosting the economy and fostering a healthier tax environment. Here are the key takeaways from this new initiative:

1. Simplified Tax System for Small and Medium Enterprises (SMEs)

For the first time, Egypt is implementing a simplified tax framework specifically tailored for SMEs with annual revenues up to EGP 15 million. This move is aimed at reducing the tax burden and facilitating compliance for smaller businesses.

2. Incentives for Entrepreneurs and Freelancers

The government is introducing new exemptions and facilities for startups, freelancers, and entrepreneurs, covering various taxes like income tax, VAT, stamp duty, and development fees. This is part of an effort to encourage innovation and small business growth.

3. Reduced VAT Declaration Requirements

Under the new system, businesses will only need to file VAT declarations four times a year. Additionally, the first tax audit for businesses will only occur after five years, providing some breathing room for newer enterprises to establish themselves.

4. Streamlined Income Tax Declarations

The government is merging salary and wage declarations with annual settlement declarations, simplifying the process for businesses and reducing the paperwork involved in annual tax submissions.

5. Electronic Settlements for Enhanced Liquidity

A central clearing system will now allow taxpayers to settle their receivables and debts electronically, providing better cash flow management options and improving liquidity for businesses.

6. Cap on Late Payment Penalties

To reduce the financial burden on taxpayers, penalties for late payments will be capped at the original tax amount. This will help businesses avoid excessive fines during prolonged audits or disputes.

7. Encouragement for Voluntary Tax Registration

Unregistered taxpayers are encouraged to register without fear of repercussions for past liabilities. Those who voluntarily declare or amend their tax returns for the years 2020-2023 will not face penalties, a move aimed at promoting compliance.

8. Double the Threshold for Transfer Pricing Studies

The threshold for mandatory transfer pricing studies has been doubled to EGP 30 million annually. This change is particularly significant for businesses involved in transactions with related parties, easing compliance requirements.

9. Formation of a Tax Advisory Council

Egypt is establishing a Tax Advisory Council for the first time. The council will work on unifying tax rulings, creating reference guides, and improving awareness. This is expected to bring more consistency and clarity to the tax system.

10. Launch of an Advanced Electronic Portal for Tax Complaints

The government will be rolling out an electronic portal for taxpayers to submit complaints and documents, aiming to streamline the resolution process and improve service delivery. The portal is part of Egypt’s broader commitment to digital transformation and taxpayer support.

These reforms reflect Egypt's efforts to modernize its tax system, encourage compliance, and make the environment more favorable for both local and foreign investors.