Rasha Abdel Aal, Head of the Egyptian Tax Authority (ETA), stated that the suggested reforms to the taxation system began with a strategic and methodical plan to ensure the sustainability of the reform approach following best international practices that satisfy taxpayers.
These reforms comprise 20 tax changes developed after a comprehensive community dialogue involving many business representatives, including the Federation of Industries, the Chamber of Commerce, major accounting firms, professional associations, and the Small, Medium, and Micro Enterprises Development Agency. Feedback, opinions, and recommendations from the business community were gathered during these discussions, leading to adjustments in the tax relief initiative to better meet the needs of businesses, taxpayers, and stakeholders.
During a press briefing to explain the first package of tax reliefs announced by the Finance Minister, Abdel Aal highlighted the authority’s genuine intent and determination to implement positive change, aiming for a true partnership that reflects a sense of belonging and an understanding of the crucial role tax revenues play in supporting Egypt’s state resources.
She said: “We are steadily progressing toward maintaining tax stability by building a balanced, supportive tax system that strongly backs the business community and promotes economic growth.” Abdel Aal emphasized the Finance Minister’s commitment to establishing disciplined and transparent tax policies that have a significant impact on attracting both foreign and local investments, focusing on fair competition among all parties.
Abdel Aal noted that the announced tax relief package was the first in a strategic plan to be implemented in phases, aiming to create a fair, stable tax system free of obstacles for taxpayers. She emphasized the importance of treating taxpayers as partners, ensuring continuous support and removing any challenges they face.
She outlined several key objectives of the tax reliefs, such as reducing burdens on taxpayers, attracting new taxpayers, supporting liquidity, standardizing and simplifying tax services, resolving long-standing disputes, and establishing an integrated system for businesses with annual revenues not exceeding EGP 15m, covering all tax liabilities. The system also includes incentives, exemptions, and reliefs that provide clarity on rights and obligations, encouraging everyone to join this integrated framework.
Abdel Aal pointed out that this system is built on several key aspects, such as exemptions from stamp duty, registration fees, capital gains tax from asset sales, and dividend distribution tax. Additionally, it exempts taxpayers from prepayment or withholding systems and offers simplified tax treatments for income tax, whether fixed or proportional. The system also limits the obligation to submit VAT returns to four times a year, and payroll tax returns to an annual settlement, with the first tax audit scheduled after five years. Importantly, those who register with the authority are not required to pay any tax dues for previous periods.
She highlighted the activation of a centralized clearing system to facilitate settlements for taxpayers, ensuring they can prioritize their financial obligations and maintain the necessary liquidity for their operations. Plans are also being explored to expand this system to include other administrative bodies, such as export support funds and taxpayer debts to the tax authority. Furthermore, a cap has been set on late payment penalties, not exceeding 100% of the original tax, to resolve any disputes stemming from substantial debt accumulated through interest charges. The authority will not impose penalties on taxpayers due to delays in tax audit procedures.
Abdel Aal affirmed that taxpayers who were unable to file their tax returns between 2020 and 2023 now have a specified period to submit them without facing legal penalties, providing an opportunity to rectify their situations and voluntarily comply with tax laws. Taxpayers can also file amended returns from 2020 to 2023 if there were errors, omissions, or missing information in the original returns, again without facing legal penalties. Additionally, the tax dispute resolution law has been extended, with the Finance Minister authorized to extend its application further.
Part of the tax reliefs includes simplifying and increasing the effectiveness of the VAT refund system to quickly provide necessary liquidity for projects. The goal is to streamline procedures, quadruple the number of VAT refunds, expand the pool of beneficiaries, and shorten the processing time. The threshold for submitting transfer pricing documentation for related parties has been raised from EGP 15m to EGP 30m annually, easing the burden on a broader range of taxpayers. Furthermore, the obligation to submit master files, local files, and country-specific reports has been lifted, aiming to enable businesses to grow and expand.
The new system also focuses on improving the tax advisory framework to unify opinions and interpretations. Guides summarizing established principles will be prepared to serve as a reference for all parties involved in the tax system. These guides will be available on the tax authority’s website to ensure widespread awareness.
Abdel Aal emphasized the enhancement of the advanced ruling system, which can issue binding decisions on transactions with future tax implications. Steps have been taken to transform the advanced ruling committee into a permanent unit under the tax authority’s head office, which will simplify transactions and clarify tax positions transparently. Additionally, the Investor Support Unit will be enhanced by transitioning to an automated system for handling complaints and inquiries, staffed with qualified technical and administrative personnel to ensure accurate and timely service. Continuous coordination with related bodies and providing up-to-date information to investors through multiple channels will also be prioritized.
Additional relief measures aim to ease burdens on taxpayers, including simplified tax returns, expanding the sampling system for audits, and pre-publishing required documentation for tax audits. Starting in 2025 for corporate entities and in 2026 for individuals, unsupported tax returns will be gradually phased out, with efforts to ensure fairness in reconciliation processes for non-compliance with filing requirements.
Abdel Aal concluded by highlighting the focus on human resources, with efforts to improve the working environment within the authority, introduce a performance evaluation and incentive system for employees, and enhance the skills of tax inspectors through advanced training programs and e-learning platforms. She concluded by stating, “We are committed to continually improving and developing the tax system to serve the interests of taxpayers and investors, and to enhance the investment climate in Egypt.”
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