Egypt’s Minister of Finance (MOF) recently announced the first phase of a package of tax facilities aimed at simplifying the tax system and reducing administrative costs and other burdens on taxpayers. The minister told parliament on 10 January 2025 that implementation of the package will have a tangible positive impact on the business community.
The key measures in the package are as follows:
In conjunction with the tax facilities, parliament adopted a law on 3 December 2024 (Law No. 160 of 2024) that reintroduces measures relating to the provisions in Law No. 79 from 2016 on the handling of tax disputes through the Dispute Resolution Committee. (The Committee is not part of the dispute level process in the tax law, but rather is established by a special law for limited period of time to help resolve outstanding tax disputes at the appeal committees and various levels of the judiciary.) Based on the new law, which applies as from 4 December, pending tax disputes will continue to be addressed and taxpayers can submit new tax dispute requests through 30 June 2025. The taxpayer must initiate the dispute resolution process with the tax authorities and include a description of the issue, the level of appeal or court handling the dispute, along with the relevant technical opinion and supporting documents.
The tax facilities announced by the MOF are a positive move towards creating a more business-friendly environment in Egypt. The measures aim to simplify the tax system, improve dispute resolution, provide penalty relief and enhance liquidity. As a result, they are expected to boost compliance, promote economic growth and increase taxpayer confidence. However, the ultimate success of the package will depend on effective implementation and how well businesses adapt to the new systems.
Egypt is offering a simplified tax system for small and medium-sized businesses, along with better access to tax dispute resolution through the Dispute Resolution Committee. This is a valuable opportunity for taxpayers to amend past tax returns without incurring penalties, fostering a stronger relationship between the tax authorities and taxpayers. Other measures, such as simplifying VAT refunds and settling outstanding debts, will also improve business liquidity and provide much-needed financial support.
Affected businesses should regularly monitor updates and stay abreast of potential changes relating to the above measures and assess how they will affect their business operations and compliance obligations.
Mustafa Makram
BDO in Egypt
The key measures in the package are as follows:
- A simplified and comprehensive tax system will be introduced for small and micro enterprises, entrepreneurs, freelancers and professionals with annual revenues not exceeding EGP 15 million.
- Businesses operating in the informal sector will be encouraged to integrate into the formal economy. Unregistered taxpayers will be able to register without worrying about past liabilities.
- Taxpayers will be able to submit or amend their tax returns for the years 2020-2023 without facing penalties. This initiative aims to rebuild trust between the government and taxpayers.
- Tax reports will be simplified and the “sampling inspection system” will be expanded to include all tax offices, facilitating compliance for businesses.
- Tax inspections will rely on a risk management system, focusing on key areas based on potential risks.
- For the first time, the government will cap late payment penalties, ensuring they do not exceed the original tax amount, which will help reduce the financial burden on taxpayers caused by delayed audits or prolonged disputes.
- The process for resolving tax disputes and addressing accumulated tax files will be accelerated to stimulate economic activity.
- The exemption threshold for preparing transfer pricing studies will be increased from EGP 15 million to EGP 30 million. As a result, companies will not be required to submit transfer pricing documentation unless their annual transactions with related parties exceed the new threshold.
- A new central clearing system will be introduced, allowing taxpayers to make electronic payments and settle their receivables and debts with the government, thus improving liquidity for businesses.
- The VAT refund system will be simplified, with the government aiming to increase the number of beneficiaries fourfold each year to further support businesses' cash flow.
- A tax advisory council will be established for the first time to unify tax rulings, produce reference guides on stable tax principles and increase tax awareness. The government will review administrative decisions to simplify and standardise tax processes.
- A permanent pre-ruling unit will be created to provide taxpayers and investors with clear guidance on future tax implications, enhancing predictability in the tax system.
- The government will facilitate the electronic submission of complaints and documents, strengthening the role of the Investor Support Unit by following international best practices.
- The sample audit system will be expanded to cover all tax offices, easing the burden on taxpayers. A portion of taxpayers will be subject to annual audits based on modern risk management systems and the capacity of technical teams to prevent delays.
- To reduce redundancy, taxpayers will only have to submit required documents once, regardless of the type of tax.
- Tax audit guidelines and mechanisms will be standardised and made available to the public, ensuring that all business sectors have clear expectations when preparing documents.
- The tax authorities’ website will be updated regularly with relevant tax legislation, instructions and circulars, facilitating taxpayer access to vital information.
- Comprehensive guides will be created to explain investors’ rights and obligations, as well as incentives and facilities provided under current tax laws.
In conjunction with the tax facilities, parliament adopted a law on 3 December 2024 (Law No. 160 of 2024) that reintroduces measures relating to the provisions in Law No. 79 from 2016 on the handling of tax disputes through the Dispute Resolution Committee. (The Committee is not part of the dispute level process in the tax law, but rather is established by a special law for limited period of time to help resolve outstanding tax disputes at the appeal committees and various levels of the judiciary.) Based on the new law, which applies as from 4 December, pending tax disputes will continue to be addressed and taxpayers can submit new tax dispute requests through 30 June 2025. The taxpayer must initiate the dispute resolution process with the tax authorities and include a description of the issue, the level of appeal or court handling the dispute, along with the relevant technical opinion and supporting documents.
BDO Insight
The tax facilities announced by the MOF are a positive move towards creating a more business-friendly environment in Egypt. The measures aim to simplify the tax system, improve dispute resolution, provide penalty relief and enhance liquidity. As a result, they are expected to boost compliance, promote economic growth and increase taxpayer confidence. However, the ultimate success of the package will depend on effective implementation and how well businesses adapt to the new systems.Egypt is offering a simplified tax system for small and medium-sized businesses, along with better access to tax dispute resolution through the Dispute Resolution Committee. This is a valuable opportunity for taxpayers to amend past tax returns without incurring penalties, fostering a stronger relationship between the tax authorities and taxpayers. Other measures, such as simplifying VAT refunds and settling outstanding debts, will also improve business liquidity and provide much-needed financial support.
Affected businesses should regularly monitor updates and stay abreast of potential changes relating to the above measures and assess how they will affect their business operations and compliance obligations.
Mustafa Makram
BDO in Egypt