News Alert: Egypt’s 2025 Key Tax Updates: New Incentives & Compliance Changes

On 12 February 2025, Egypt introduced Laws No. 5, 6, and 7 of 2025, implementing key tax reforms to encourage voluntary registration, provide tax incentives for businesses with annual revenue up to EGP 20M, and amend tax procedures. The laws came into effect on 13 February 2025 (Effective Date). We summarized hereunder the key provisions:

Law No. 5 of 2025 – Voluntary Registration & Dispute Settlement

1. Voluntary Registration: Unregistered taxpayers have three months from the Effective Date to register voluntarily and submit past returns without penalties. To qualify, they must register for corporate income tax and VAT within the three-month grace period, have no prior Egyptian Tax Authority (ETA) assessments, and submit all required documents electronically. The grace period may be extended by the Minister of Finance.
2. Filing and Compliance Adjustments: Taxpayers who have not submitted tax returns for periods starting from FY2020 or need to amend previously filed returns can do so within six months from the Effective Date without incurring late penalties.
3. Dispute Settlement:
   • Deemed-basis inspections (pre-2020): Taxpayers may request to settle disputes by paying 30% of the tax due (if a return was filed) or 40% of the assessed amount (if no return was filed). Installments are allowed over one year without penalties.
   • Actual inspections (pre-2020): 100% waiver of penalties and interest if the original tax due is fully paid within three months of the settlement request.
   • Natural persons: Individuals who sold real estate or unlisted securities in the last five years without paying the due tax may request to settle their obligations and pay the due tax within six months from the Effective Date to benefit from a full waiver of delayed interest fines.

Law No. 6 of 2025 – Tax Incentives for Businesses with Annual Turnover ≤ EGP 20M

Law No. 6 applies to businesses with annual revenue ≤ EGP 20M, regardless of tax registration. Businesses must apply to ETA for incentives, with eligibility based on financial data before 1 March 2025.

1. Eligibility

To qualify for incentives, businesses must submit tax returns on time and integrate with the ETA’s electronic systems, including e-invoicing and e-receipts.

2. Key Incentives
a. Reduced corporate income tax rates ranging from 0.4% to 1.5% for companies with annual turnovers between EGP 500K and EGP 20M.
b. Limited tax benefit retention if turnover exceeds EGP 20M (phased out if the increase exceeds 20% in 5 years).
c. Exemptions from:

• State development fees, stamp tax, and registration fees on Articles of Association, credit facility contracts, mortgages, guarantees for financing, and land registration for business establishment.
• Capital gains tax on the sale of machinery, equipment, or fixed assets.
• Withholding tax on dividend distributions.
• Local withholding tax or advance payments system.

d. Simplified compliance measures, including a streamlined tax return process and electronic accounting systems.

3. Exclusions

Businesses offering professional consulting services where 90% or more of their revenue is derived from one or two clients, and businesses restructuring solely to qualify for tax incentives without economic intent.

Law No. 7 of 2025 – Amendments to the Unified Tax Procedures Law

1. Delay penalties and additional tax shall not exceed 100% of the original tax due.
2. Tax offenses may be settled by paying at least 50% of the minimum fine.
3. Withholding tax adjustment, a 12.5% compensation rate applies to uncollected or unremitted withholding tax, in addition to the due tax and delay penalties. 

What to do?

Businesses should assess their eligibility for tax incentives, ensure compliance with new electronic integration requirements, and evaluate pending tax disputes for potential resolution under these new laws.