In February 2025, Egypt introduced a sweeping overhaul to its tax legislation through the issuance of Laws No. 5, 6, and 7 of 2025. This package marks one of the most significant shifts in the country’s fiscal framework in over a decade. Aimed at modernizing tax administration, improving compliance, and enhancing transparency, the reforms affect a broad spectrum of stakeholders—from individual taxpayers and SMEs to multinational corporations operating in Egypt.
This article provides an overview of the key changes and their potential impact on Egypt’s business and legal environment.
The Legislative Package at a Glance
- Law No. 5 of 2025 : settlement of the statuses of some taxpayers and tax collectors.
- Law No. 6 of 2025 introduces some tax incentives and facilitations for projects that its annual turnover does not exceed 20,000,000 EGP (Only Twenty Million Egyptian Pounds)
- Law No. 7 of 2025 amends number of key provisions of the unified tax law No. 206 of 2020
Key Changes Introduced
A) Settlement of the statuses of some taxpayers and tax collectors (Law No. 5 of 2025)
- Voluntary Registration:
Unregistered taxpayers shall not be subject to tax assessment for periods preceding the effective date of that law.
For purposes of the Income Tax Law No. 91/2005 and the VAT Law No. 67/2016, the effective date of this law shall be deemed the commencement date of business activity.
- Submit a registration request for income tax and VAT (if VAT registration is legally required) within three months from the effective date, subject to one possible extension by the Minister of Finance.
- No tax procedures have been initiated against the applicant before the effective date.
- All required registration documents must be submitted through the Egyptian Tax Authority’s electronic systems according to the mandatory stages.
- Grace Period for submission of Tax returns:
The law grants a six-month grace period from its enforcement date for taxpayers to submit pending or amended tax returns for periods since 2020, without penalties or interest.
- Settlement of Disputes:
The law allows taxpayers with disputes over pre-2020 tax periods to settle by paying a reduced percentage of the assessed tax—30% if a return was filed, or full tax plus 40% if not—with the option to pay in four penalty-free installments.
Furthermore, a full waiver of penalties for pre-2020 audited periods if the principal tax is paid within three months.
At last, the law sets out clear procedures and statutory periods for requesting dispute settlements, suspends disputes upon request, and grants a full waiver of delay interest for qualifying real estate and unlisted securities transactions if taxes are paid within the specified time.
B) Tax incentives and facilitations for projects that its annual turnover does not exceed 20,000,000 EGP (Only Twenty Million Egyptian Pounds) (Law No. 6 of 2025)
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General Provisions
- Criteria for the determination of the project’s turnover:
- Details of the most recent final tax assessment for the project registered with the Tax Authority as of the law’s effective date.
- Details of the latest tax return submitted by the registered project but not yet assessed as of the law’s effective date.
- Details of the tax return submitted by a project registered after the law’s effective date.
- Data available through the electronic invoice or e-receipt system.
- Conditions to benefit from the tax incentives and facilitation:
- Submitting the required tax return within the statutory periods stipulated in the law.
- Joining the Tax Authority’s electronic systems, including the e-invoice or e-receipt system, in accordance with the implementation stages set by the Tax Authority’s Chairman, and issuing the required invoices or receipts.
- Projects/activities that fall outside the scope of the application of the law:
- Professional consulting activities where at least 90% of the annual business volume comes from providing professional consultations to one or two persons.
- Projects that engage in any act or conduct intended to fall under this law without legitimate grounds, including the division or fragmentation of an existing activity without an economic justification. The burden of proof lies with the Tax Authority.
- Criteria for the determination of the project’s turnover:
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Tax Incentives
Projects covered by this law enjoy several exemptions, including:
- No state resource development fees, stamp duty, or fees for registering company formation contracts, credit facility and mortgage contracts related to their activities, guarantees for financing, or land registration needed for the project.
- No tax on capital gains from selling fixed assets, machinery, or production equipment.
- No dividend tax on profit distributions from their activities.
- Income tax is calculated as a fixed percentage of annual turnover:
- 0.4% if turnover is less than EGP 500,000.
- 0.5% if turnover is EGP 500,000 to less than EGP 2 million.
- 0.75% if turnover is EGP 2 million to less than EGP 3 million.
- 1% if turnover is EGP 3 million to less than EGP 10 million.
- 1.5% if turnover is EGP 10 million to EGP 20 million.
If turnover exceeds EGP 20 million within five years by no more than 20%, and only once, the project keeps the 1.5% rate. If the excess is higher or repeated, the benefits end from the next year.
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Tax Facilitations
- Projects under this law are not subject to the withholding or advance payment system under Income Tax Law No. 91 of 2005.
- They have a separate annual income tax return form for their commercial, industrial, or professional activity, to be determined by the Minister of Finance upon the Tax Authority’s proposal and filed within the statutory periods of the Unified Tax Procedures Law.
- For VAT, a return must be filed every three months using the designated form, with payment of the tax due.
- For payroll tax, these projects are only required to submit the annual tax settlement return under the Unified Tax Procedures Law along with the payment of the due tax.
- Tax returns for these projects (income tax and VAT) may only be audited after five years from the date of applying for this law’s benefits.
C) Law No. 7 of 2025 amending key provisions in the unified tax law No. (206) of 2020.
- Delay interest or additional tax cannot exceed 100% of the principal tax on which it is charged.
- Tax-related crimes (that do not involve outstanding tax liabilities) may be settled by accepting a compensation payment of at least 50% of the minimum fine and not more than double that amount, before a criminal case is filed.
- If the criminal case is already filed, settlement is allowed before a final judgment by paying compensation equal to the minimum fine and up to three times that amount.
- If a final judgment is issued, settlement is still possible by paying compensation equal to four times the minimum fine and up to its maximum limit.
- All payments must be made to the Tax Authority’s treasury or to an authorized recipient.
- The crimes stipulated in Article 135 of Income Tax Law No. 91 of 2005 may be settled upon the payment of:
- 12.5% of amounts that were not withheld, deducted, or collected.
- 12.5% of amounts that were withheld, deducted, or collected but not remitted. This is in addition to paying the principal amounts and any applicable delay interest.
Practical Implications for Businesses
Firms operating in Egypt should immediately review their tax compliance processes and evaluate how the new laws affect their operations. Immediate evaluation will be critical to ensure full compliance, optimize available incentives, and mitigate potential risks under the updated legal framework.
Stay Ahead of Egypt’s Corporate and Commercial Law Shifts
At Shehata & Partners, we are already advising clients across industries on how to navigate the transition period and mitigate potential risks. As the implementation framework develops, proactive legal and fiscal planning will be critical.
The 2025 tax reforms mark more than just legislative change; they signal a new era in Egypt’s corporate and commercial law space. Our corporate team is uniquely placed to serve not only as a valuable legal advisor but also as a strong business partner to our clients.
