Egypt: Transforming Taxation in 2025 – Key Highlights of Laws No. 5, 6, and 7

Egypt has introduced three landmark tax laws - Laws No. 5, 6, and 7 of 2025 - aimed at simplifying tax compliance, incentivizing SMEs, and modernizing tax enforcement. These reforms introduce new tax exemptions, streamlined compliance procedures, and updated penalty structures, reflecting Egypt’s commitment to fostering a more business-friendly environment.

Law No. 5 of 2025: Regularizing Taxpayer Status

Law No. 5 of 2025 provides an opportunity for unregistered businesses and taxpayers to regularize their tax status without facing back taxes or penalties.

1. Scope and Key Definitions

This law applies to taxpayers under the following regulations:

• Income Tax Law (Law No. 91 of 2005)

• Value Added Tax (VAT) Law (Law No. 67 of 2016)

• Stamp Duty Law

• State Financial Resource Development Fee

2. Exemption from Past Tax Obligations

• Businesses that were not registered with the Egyptian Tax Authority (ETA) before this law's enactment will not be subject to retroactive taxes or penalties.

• The official start date of operations will be considered the date this law comes into effect, allowing businesses to comply without historical tax liabilities.

3. Mandatory Registration Within Three Months

To benefit from this law, businesses must:

• Register with the ETA for income tax.

• Register for VAT (if they meet the mandatory threshold).

• Complete registration within three months of the law’s enactment.

• The Minister of Finance may extend this period once if needed.

This law encourages business formalization by offering a clean slate to previously unregistered businesses while expanding Egypt’s tax base.

Law No. 6 of 2025: Tax Incentives for SMEs

Law No. 6 of 2025 introduces special tax incentives and simplified procedures for small and medium-sized enterprises (SMEs) with annual revenue not exceeding EGP 20 million.

1. Eligibility Criteria

Businesses eligible for this law include:

• All professional and commercial activities, whether currently tax-registered or not.

• Businesses with annual revenue of EGP 20 million or less.

2. Simplified Tax Rates

Instead of the standard corporate income tax, SMEs will pay a fixed percentage of their annual revenue:

• 0.4% for revenue below EGP 500,000.

• 0.5% for revenue between EGP 500,000 and EGP 2 million.

• 0.75% for revenue between EGP 2 million and EGP 3 million.

• 1% for revenue between EGP 3 million and EGP 10 million.

• 1.5% for revenue between EGP 10 million and EGP 20 million.

If an SME exceeds the EGP 20 million threshold once (by up to 20%) within five years, it can continue benefiting from the 1.5% tax rate. However, if it surpasses this limit multiple times, it loses eligibility the following year.

3. Tax Exemptions

SMEs under this law are exempt from several taxes and fees, including:

• State Financial Resource Development Fee

• Stamp Duty Tax

• Notarization and registration fees for company formation, loans, and mortgages

• Land registration fees for business-related property

• Capital gains tax on the sale of business assets

• Dividend distribution tax

4. Simplified Tax Compliance

• No formal bookkeeping requirements - a simplified system will be used.

• Quarterly VAT returns instead of monthly filings.

• Annual payroll tax reconciliation instead of monthly reports.

• Tax audits deferred for five years after opting into this system.

This law reduces the tax burden on SMEs while encouraging compliance and growth.

Law No. 7 of 2025: Strengthening Tax Procedures and Digital Compliance

Law No. 7 of 2025 introduces key amendments to the Unified Tax Procedures Law (Law No. 206 of 2020), focusing on penalty limits, tax settlements, and digital enforcement.

1. Cap on Late Payment Penalties

A new provision (Article 45 bis) sets a maximum limit of 100% of the original tax amount for late payment penalties or additional taxes, ensuring fairness and predictability in tax penalties.

2. Enhanced Tax Dispute Resolution and Settlements

A new article (Article 75 bis) introduces revised rules for resolving tax-related legal disputes:

• The Minister of Finance (or a delegate) may settle tax-related offenses that do not involve unpaid tax liabilities.

• A settlement payment of at least 50% of the minimum fine is required before prosecution.

• If a criminal case is already filed, the taxpayer may settle by paying at least the minimum fine, up to three times its amount.

• If a final court ruling has been issued, settlement is still possible by paying four times the minimum fine.

These amendments provide greater flexibility for taxpayers to resolve disputes while reducing legal backlogs.

3. Strengthening Digital Tax Enforcement

The law reinforces electronic tax compliance by requiring businesses to:

• Integrate with Egypt’s e-invoicing system.

• Maintain digital records for tax reporting and audits.

• Comply with enhanced digital tracking measures to improve enforcement.

These changes support Egypt’s transition to a fully digital tax system, reducing tax evasion and improving efficiency.

Conclusion: A Balanced and Progressive Tax Reform

With Laws No. 5, 6, and 7 of 2025, Egypt is implementing a more transparent, business-friendly, and efficient tax system:

• Law No. 5 of 2025 helps unregistered businesses regularize their tax status without backdated liabilities.

• Law No. 6 of 2025 provides significant tax incentives for SMEs, reducing administrative burdens.

• Law No. 7 of 2025 modernizes tax enforcement and penalty structures, ensuring fairness and efficiency.

These reforms encourage compliance, support SMEs, and enhance tax collection efficiency, positioning Egypt as a regional leader in tax modernization and economic growth.