22 July 2025 Egypt introduces significant VAT updates on certain goods and services
On 17 July 2025, the Egyptian Parliament issued Law No. 157 of 2025 (Amendment Law), which introduces significant amendments to the original Value-Added Tax (VAT) Law (Law No. 67 of 2016). These changes primarily aim to increase state revenue and enhance financial stability by adjusting taxes on cigarettes and alcohol, while also broadening the application of VAT to include commercial trademarks, crude oil and certain news/advertising services. The Egyptian Parliament initially enacted VAT Law No. 67 on 7 September 2016, establishing an initial framework for the application of VAT for taxpayers in Egypt. The issuance of the Amendment Law reflects the government's ongoing commitment to expand its revenue streams. The primary objectives in issuing this law include securing funding for budgetary needs, maintaining financial stability, and supporting social programs in areas like health and education, while ensuring compliance with international standards, particularly those set by the World Health Organization. In addition to the current 50% VAT of the final consumer's selling price, the fixed tax amounts on cigarettes have been revised based on their selling price according to the following categories:
Cigarette prices will increase by 12% annually for three years starting 5 November 2025, with the Council of Ministers having the authority to reduce this annual increase based on the Minister of Finance's proposal, considering an analysis of the actual production costs that impact the final selling price to consumers. The tax structure has shifted to a fixed-amount basis, eliminating the previous percentage-based calculation. This revised structure applies to the following categories:
The fixed tax amounts will be subject to an annual increase of 15%, starting from the following year, for a period of three years, to be reduced to 12% thereafter. The VAT rate for contracting and construction services (i.e., supply and installations) has shifted from a scheduled tax rate of 5% to a general VAT rate of 14%. The key benefit in applying the general VAT rate is the possibility of allowing input VAT recoverability, which is not permitted under the schedule tax application. A 10% schedule tax will now apply to 10% of the rental or selling price of commercial trademarks for administrative units, which was previously tax exempt. News agency services, which were previously exempt from VAT, will now be subject to the 14% general VAT rate. Being subject to VAT, the news agency service providers will have the right to deduct input VAT. The exemption for advertisement services is now limited exclusively to advertisements seeking donations for treatment and medical care within private, nonprofit hospitals and government institutions. Affected taxpayers should review the provisions of the Amendment Law and assess the impact on their current transactions to facilitate compliance.
Document ID: 2025-1554 | ||||||
