CAIRO — Egypt has embarked on one of its most consequential tax reform drives in years, pairing targeted incentives for small businesses with long-requested fixes to tax procedures. The package—anchored in Laws No. 5, 6, and 7 of 2025—aims to widen formalization, reduce litigation backlogs, and make compliance simpler and more predictable, signalling a bid to re-energize private-sector growth amid a challenging macroeconomic backdrop.
At the heart of the agenda is Law No. 6 of 2025, which introduces a simplified regime for small enterprises with annual turnover up to EGP 20 million. The measure offers streamlined registration, lower effective tax burdens tied to turnover, and an integration pathway for firms operating at the margins of the formal economy. By cutting administrative friction and reducing entry costs, the government is betting that more businesses will opt in, lifting voluntary compliance and stabilizing receipts without resorting to headline rate hikes.
Complementing this, Law No. 5 of 2025 provides a structured route to settle legacy disputes and regularize historic filings, giving taxpayers the ability to file or amend returns back to FY 2020 and resolve contentious assessments through higher-calibre committees—an attempt to unclog courts and restore certainty to investors wary of open-ended tax risks. In parallel, Law No. 7 of 2025 amends the unified procedures law, including a cap on delay penalties at 100% of the original tax, a change designed to make sanctions proportionate and predictable. Together, these provisions address long-standing business complaints about process opacity and punitive penalties.
The reform thrust arrives as international partners and investors press for deeper structural change. Boosting private-sector dynamism will require tackling compliance gaps while broadening the tax base and improving governance around state-owned entities. In that context, Egypt’s tax package reads as both a growth enabler and a credibility signal: it nudges informality toward formality, lowers compliance friction for SMEs, and tempers penalty exposure—moves that can help rebuild confidence if implementation holds.
Early commentary from professional services and legal advisers converges on three likely near-term effects. First, SME formalization should accelerate as simplified onboarding and turnover-linked liabilities reduce the perceived cost of entering the net. Second, compliance efficiency may improve as tax offices shift time from legacy disputes to current risk-based administration under clearer procedure rules. Third, investment signalling could strengthen, particularly for mid-market investors who price legal-process risk heavily when evaluating Egypt against regional peers. Those outcomes, however, hinge on timely guidance, robust digital enablement, and consistent application across tax offices.
Execution risks are real. Any simplified regime can be gamed if anti-fragmentation rules are weak or inconsistently enforced; likewise, dispute-settlement windows can create short-term revenue volatility if not paired with strong post-amnesty controls. Integrating reforms with Egypt’s ongoing digitization—e-filing, data-matching, and potential e-invoicing expansions—will be crucial to translate statutory changes into durable compliance gains. Clear taxpayer communications, service-level targets, and transparent reporting on settlements and penalties will determine whether businesses internalize the shift as a genuine break from the past.
Bottom line: By aligning incentives (Law 6) with certainty and due process (Laws 5 and 7), Egypt has moved to recalibrate the tax-growth compact. If consistently applied—and reinforced by digital administration and governance improvements—the 2025 package can lower the cost of formality, reduce litigation drag, and improve the country’s risk premium for investors looking at North Africa’s largest market.
Credit: This article acknowledges the original publication, “Egypt charts course for business growth with raft of tax initiatives,” by International Tax Review.
