Executive summary

On 12 February 2025, the Egyptian Parliament published Law No. 6 of 2025 (Law No. 6) in the Official Gazette, as part of a comprehensive package of tax laws.

Law No. 6, effective from 1 March 2025, introduces tax incentives for small enterprises with annual turnover not exceeding 20 million Egyptian Pounds (EGP20m), including various exemptions, reduced tax rates and simplified tax procedures.

Detailed discussion

Background

The issuance of Law No. 6 is in line with the government's aim to promote a more vibrant and compliant business tax landscape, encouraging economic growth in Egypt, and fostering a more conducive business environment for small business.

Key elements of Law No. 6

Law No. 6 applies to businesses with an annual turnover not exceeding EGP20m irrespective of whether they are registered for tax purposes.

To benefit from the incentives provided by Law No. 6, businesses must submit a request to the tax authority.

Businesses should meet certain criteria for turnover based on financial data available prior to the effective date of Law No. 6, i.e.,1 March 2025, ensuring a consistent and fair evaluation process.

Eligibility for incentives

Law No. 6 provides tax incentives for certain businesses, provided that the following conditions are met:

• Submission of tax returns by the prescribed deadline
• Integration with the Egyptian Tax Authority's electronic systems, including electronic invoicing and electronic receipts

Tax incentives

Law No. 6 provides eligible businesses certain incentives, as follows:

a) Exemption is provided from:

• State development fees, stamp tax and documentation and registration fees for corporates' Articles of Association (AOA), credit facility contracts, mortgages related to their business, and other guarantees they provide to obtain financing and land registration contracts necessary for establishing these businesses
• Capital gains tax on the sale of machinery, equipment or fixed assets
• Withholding tax on dividend distributions
• Local withholding tax or advance payments system

b) Reduced corporate income tax rates ranging from 0.4% to 1.5% for companies with annual turnovers between EGP500k and EGP20m

However, if the annual turnover exceeds the threshold of EGP20m, any of the following scenarios shall apply:

1. If the increase does not exceed 20% above the threshold (i.e., EGP20m) within a five-year period, the 1.5% tax benefit will be maintained for one additional year only.
2. If the increase exceeds the 20% above the threshold limit (i.e., EGP20m), all reduced tax benefits will be revoked, starting from the following year.

c) Tax facilities

A separate form, different from the standard corporate income tax return form, should be submitted for the annual corporate tax return on the due date stated in the Unified Tax Procedures Law.

Instead of a monthly value-added tax (VAT) return, a quarterly VAT return should be submitted using its designated form within one month following each quarter, along with settling the relevant tax due.

Only an annual salary tax return should be submitted on the due date stated in the Unified Tax Procedures Law, along with settling the relevant tax due.

Corporate tax and VAT inspections are conducted five years following the submission date of the request to avail the benefits of Law No. 6.

Simplified bookkeeping rules apply.

Exclusions

Law No. 6 does not apply to:

• Businesses providing professional consulting services for which at least 90% or more of the revenue comes from one or two clients only
• Businesses that restructure solely to qualify for tax incentives (i.e., segmenting activities without any economic intent)

Eligible businesses are not allowed to withdraw their request to avail of the incentives provided under Law No. 6 for a period of five years, starting from the day following the submission of the request.

Implications

Taxpayers should consider the provisions of Law No. 6 and assess their eligibility to avail the relevant tax benefits and incentives that can support their business growth while facilitating tax compliance.