Egypt Launches Tax Incentives to Shore Up Private Sector Partnerships

The Egyptian government has announced a package of new tax incentives aimed at strengthening partnerships with the private sector, fostering economic growth, and attracting investment. According to the Ministry of Finance, these incentives are designed to ease financial pressures on businesses while enhancing the overall investment climate, with a focus on supporting startups, small and medium enterprises, and fostering liquidity.

The initiative introduces several tax breaks and streamlined filing processes. Startups and small enterprises with annual revenue up to EGP 15 million are exempt from capital gains tax, dividend distribution tax, stamp duty, and registration fees, along with withholding or advance tax payments. Filing requirements have also been simplified, reducing value-added tax declarations to four per year, with the first inspection occurring five years after registration. In addition, a centralized clearing system now allows businesses to electronically settle government dues, which is expected to further improve liquidity.

Penalties for delayed tax payments will be capped at the original tax amount, reducing burdens for businesses with unresolved disputes or late inspections. Unregistered taxpayers can now register without owing past liabilities, encouraging voluntary compliance. Companies are also permitted to amend or submit tax declarations from 2020 to 2023 without penalties. Additionally, the mandatory threshold for transfer pricing studies has doubled to EGP 30 million, while efforts to expedite VAT refunds are underway to double the number of beneficiaries annually.

By 2025, the government will phase out non-supporting declarations for corporations and for individuals by 2026. The sample audit system will also expand to cover all tax districts nationwide, and the Tax Disputes Resolution Law has been extended, offering simplified methods to resolve pre-2020 disputes. These settled disputes may now be paid in installments over a year without additional penalties.

The government has allocated EGP 23 billion to support exports, aiming to enhance cash flow for exporters and stimulate various sectors. Specific incentives include EGP 1.5 billion for the National Automobile Industry Program, EGP 50 billion to expand tourism and job creation, and additional support for mobile phone manufacturers. A new initiative will also promote vehicle conversions to natural gas or electricity. Social spending in areas like health, education, and social programs also saw a significant boost, totaling EGP 133 billion in the first fiscal quarter, a nearly 40% increase. Programs like Takaful and Karama received EGP 9.6 billion in cash support, with funds also directed towards food commodities, health services and education. Approximately 330,000 low-income housing units were provided, and natural gas connections reached an additional 1.2 million households.

In addition, Egypt’s medium-term debt strategy is focused on reducing public debt, limiting foreign debt exposure, and reaching a debt-to-GDP ratio of 85% by the end of the fiscal year. Public debt-to-GDP declined from 96% in June 2023 to 89.6% by June 2024, with external debt for budget agencies reduced by over USD 3 billion, and further cuts of USD 2 billion targeted by year-end. Fitch Ratings recently upgraded Egypt’s credit rating to “B” with a stable outlook, reflecting the country's fiscal improvement.

Alongside these tax reforms, the government introduced a 2030 tax policy strategy, currently open for public input, and established the Supreme Tax Council to oversee tax relief packages for real estate and customs.