New Tax Incentives for SMEs: Understanding Egypt’s Law No. 6 of 2025
Introduction
On February 12, 2025, the President of the Republic of Egypt enacted Law No. 6 of 2025. This law introduces a series of tax incentives and facilities aimed at supporting projects with an annual turnover not exceeding twenty million Egyptian pounds. The legislation is designed to foster economic growth by providing financial relief and simplifying tax procedures for small and medium-sized enterprises (SMEs).
Key Provisions of Law No. 6 of 2025
Definitions
- Projects Subject to the Law: Refers to projects with an annual turnover not exceeding twenty million Egyptian pounds (approximately USD 40,000 based on the exchange rate at the date of this article), including professional activities, whether registered for tax purposes at the time of the law’s enactment or not.
- The Authority: The Egyptian Tax Authority.
Determining Turnover
The turnover of a project can be determined based on:
- The latest final tax assessment.
- The latest tax return submitted.
- The tax return submitted after the law’s enactment.
- Data from the electronic invoice or receipt system.
Conditions for Benefiting from Tax Incentives
Projects must:
- Submit tax returns as specified in Article 12. Article 12 outlines the specific tax return requirements for projects, including the submission of an independent annual tax return, a quarterly VAT return, and an annual payroll tax reconciliation return, all within the specified deadlines and accompanied by the necessary tax payments.
- Join the electronic systems of the authority, including the electronic invoice or receipt system, according to the stages of mandatory implementation decided by the head of the authority.
Exclusions
The law does not apply to:
- Professional consulting activities where at least 90% of the annual turnover is derived from providing professional consultations to one or two persons.
- Projects that attempt to unjustifiably fall under the law’s provisions, such as by dividing or fragmenting existing activities without economic justification. The burden of proof lies with the authority.
The Minister of Finance may exempt certain activities from these exclusions.
Prohibition on Opting Out
Projects cannot opt out of the law’s benefits before five years from the date of application.
Tax Incentives
Exemptions from Fees and Duties
Projects are exempt from:
- The development fee.
- Stamp duty.
- Registration fees for company establishment contracts, credit facilities, mortgages, and land registration necessary for the projects.
Exemption of Capital Gains
Capital gains from the sale of fixed assets, machinery, or production equipment are exempt from tax.
Exemption of Profit Distributions
Profit distributions from the projects are exempt from the tax on these distributions.
Reduced Income Tax Rates
The income tax rates for Projects are based on their annual turnover:
- 0.4% for projects with an annual turnover less than 500,000 pounds.
- 0.5% for projects with an annual turnover between 500,000 and 2 million pounds.
- 0.75% for projects with an annual turnover between 2 million and 3 million pounds.
- 1% for projects with an annual turnover between 3 million and 10 million pounds.
- 1.5% for projects with an annual turnover between 10 million and 20 million pounds.
If a Project’s annual turnover exceeds twenty million pounds by up to 20% once within five years from the date of application, it continues to benefit from the law’s provisions at the 1.5% tax rate. If the turnover exceeds this threshold or the 20% increase occurs more than once, the project loses the benefits from the following year.
Tax Facilities
Exemption from Advance Payment and Installment Systems
Projects are exempt from the advance payment system and the installment system under the Income Tax Law No. 91 of 2005.
Tax Return Requirements
Projects must submit:
- An independent annual tax return for their commercial, industrial, or professional activities, as specified by the Minister of Finance.
- A quarterly VAT return, submitted within the month following the end of each quarter, along with the payment of the tax.
- An annual payroll tax reconciliation return, as specified in the unified tax procedures law, along with the payment of the tax.
Simplified Record-Keeping
Projects are exempt from maintaining the records and documents required by the unified tax procedures law. Instead, they must adhere to simplified record-keeping systems as determined by the Minister of Finance.
Implementation Decisions
The Minister of Finance is mandated to issue the necessary decisions to implement the law within a month of its enactment.
Repeal of Previous Provisions
Specific articles of the Law on the Development of Medium, Small, and Micro Enterprises (Law No. 152 of 2020) are repealed.
Effective Date
The law will be published in the official gazette and will come into effect from the first day of the month following its publication.
Conclusion
Law No. 6 of 2025 represents a significant step towards supporting small and medium-sized enterprises in Egypt by providing them with substantial tax incentives and simplifying their tax obligations. By reducing the financial burden and administrative complexities, the law aims to foster a more conducive environment for the growth and development of SMEs, ultimately contributing to the broader economic development of the country.
For more information about the law, its application and implications, please feel free to contact Dr. Fatma Salah.
