ETA announces targeted amendments to Value-added Tax Law

Daily News Egypt

29-06-2025

The Egyptian Tax Authority (ETA) announced on Sunday a set of limited amendments to the Value-Added Tax (VAT) Law, designed to broaden the tax base, correct market distortions, and strengthen the state's capacity to finance increased investments in human development. The Authority noted that these changes were introduced in response to recommendations from representatives across several productive sectors.
In its official statement, the Authority confirmed that there would be no changes to VAT exemptions on essential goods, food products, healthcare services, or education, and no increase to the general VAT rate.
'We are working to eliminate distortions in the current system to enhance tax equity, meet the demands of the business community, and promote integration with digital tax systems,' the Authority said. 'The aim is to expand the tax base in alignment with the standards of the World Health Organization, the World Tourism Organization, and global best practices.'
As part of the reforms, the construction sector will now be subject to the standard VAT rate instead of the previously applied 5% schedule tax. Contractors will be eligible to deduct all applicable input taxes on goods and services, including those paid on machinery and equipment used to perform construction work. The ETA noted that this shift may lower overall construction service costs, as input taxes will no longer be included in the taxable base. Contractors will also be entitled to reclaim VAT on qualifying purchases, provided they present proper invoices—helping support efforts to formalise the sector and expand the tax base.
The statement also clarified that shops and administrative units located in non-commercial areas will continue to be exempt from VAT. However, administrative units located within commercial premises—such as malls and commercial centers—will now be taxed at 1% of their sale or rental value. The move is intended to align the treatment of these units with existing taxes applied to commercial shops within the same zones.
Under the new amendments, crude oil—distinct from petroleum products—will now be subject to a 10% schedule tax. This change is not expected to affect domestic petroleum product prices, as the Egyptian General Petroleum Corporation remains the sole purchaser of crude oil in the country. The tax will be accounted for in the Corporation's upcoming budget and is expected to be offset by projected cost savings.
In response to formal requests from companies operating in Egypt, the revised law also expands cigarette tax brackets and increases the fixed tax on cigarettes by EGP 0.50—the first increase since 2023. Additionally, a new fixed and progressive schedule tax has been introduced on alcoholic beverages, calculated based on alcohol content, replacing the former proportional tax on sale value.
The Tax Authority stressed that these amendments are part of a broader strategy to address sector-specific concerns, support producers and manufacturers, and ensure compliance with international public health and economic standards.