EGYPT: Law No. 6 of 2025 Granting Incentives and Tax Benefits for SMEs

On 12 February 2025, Egypt enacted its new law No. 6 of 2025 which grants incentives and tax benefits for projects which total annual return does not exceed EGP 20,000,000 (the “SME Tax Incentives Law”).

The SME Tax Incentives Law was published in the Official Gazette on 12 February 2025 and entered into force the following day.

I.  Eligible Projects

Projects that may benefit from the SME Tax Incentives Law are such projects, including professional projects, which total annual business volume does not exceed EGP 20,000,000, irrespective of whether they are registered for tax at the time of entry into force of the SME Tax Incentives Law. Such annual business volume shall be assessed based on:

1. 1. 1. the data of the last final tax assessment of the project that was registered with the Egyptian Tax Authorities (the “ETA”) at the time of entry into force of the law;
      2. the data of the last tax return submitted to the ETA by the registered project which did not pay taxes until the entry into force of the law;
      3. the data under the tax return submitted by the project that is registered following the enactment of the law; or
      4. data available on the government e-invoicing system or e-receipt.

In addition, the pertinent projects shall make their tax filings described under the law within the statutory timelines, and shall join the ETA’s e-system and abide by its regulations.

II.  Non-eligible activities

Even if a project might satisfy the above requirements, the following projects/activities are excluded from the application of, and may thus not benefit from, the SME Tax Incentives Law:

1. 1. 1. Professional consultation activities where 90% of their annual business volume is generated from providing professional consultancy to one or two persons. The Minister of Finance may exempt certain activities from this exclusion; and
         
      2. Projects which undertake any act or behavior for the purpose of unlawfully getting captured by the provisions of the SME Tax Incentives Law. Such acts include, for example, dividing the project’s activities absent an economic reasoning. The burden of proving this claim remains with the ETA.

It is noteworthy that projects subject to the SME Tax Incentives Law may not withdraw from their request to benefit therefrom except after five years from the day following their submission of the request.

III. The Incentives

Projects captured by the SME Tax Incentives Law (“SMEs”) shall enjoy the following incentives and benefits:

1. 1. 1. The SMEs shall be exempt from the State financial resources development fee, stamp tax and notary and registration fees relating to incorporation documents and facilities and mortgages relating to their activities, as well as taxes and fees relating to the registration of plots that are necessary to establish the projects.
      2. Transactions relating to the disposal of fixed assets, machines or production equipment of the SMEs shall be exempt from capital gains tax.
      3. Dividends of the SMEs shall be exempt from taxes.
      4. Income taxes shall be calculated as follows:
         
         1. 1. A tax of 0.4% of the business volume shall apply on projects which annual business volume is less than EGP 500,000;
            2. A tax of 0.5% of the business volume shall apply on projects which annual business volume is more than EGP 500,000 and less than EGP 2,000,000;
            3. A tax of 0.75% of the business volume shall apply on projects which annual business volume is more than EGP 2,000,000 and less than EGP 3,000,000;
            4. A tax of 1% of the business volume shall apply on projects which annual business volume is more than EGP 3,000,000 and less than EGP 10,000,000; and
            5. A tax of 1.5% of the business volume shall apply on projects which annual business volume is more than EGP 10,000,000 and less than EGP 20,000,000.

         In the event the annual business volume exceeds only once EGP 20,000,000 by 20% at any year during the five years following the submission of a request to benefit from the SME Tax Incentives Law, the project shall continue to benefit from the tax rate stipulated above under item (v), i.e., 1.5% of the business volume. Otherwise, if the excess goes beyond the 20% or is repeated more than once during the five-years’ period, the project shall cease to benefit from the incentives as of the year following.

      5. SMEs are not subject to tax withholding or advance payment systems set out under the Income Tax Law No. 91 of 2005.
      6. SMEs will follow a special income tax return template, as will be issued by the Minister of Finance, to be submitted annually at the standard statutory deadlines. As regards VAT returns, they shall be submitted for every three months’ period during the following month along with remitting the tax. For payroll tax, the responsibility of the SMEs will be limited to submitting the annual settlement declaration along with remitting the tax. The SMEs’ income and VAT returns shall be inspected after five years from the respective project’s submission of the request to benefit from the SME Tax Incentives Law.
      7. SMEs shall be exempt from the obligation to maintain the ledgers, registers and documents set out under the Unified Tax Proceedings Law. Instead, they shall abide by the simpler system to be issued in this regard by the Minister of Finance.

If you would like more information about this topic then please contact us.

• NARIMAN ROUSHDY SENIOR ASSOCIATE roushdy@amereller.com

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On 12 February 2025, Egypt enacted its new law No. 6 of 2025 which grants incentives and tax benefits for projects which total annual return does not exceed EGP 20,000,000 (the “SME Tax Incentives Law”).