CAIRO — Egypt has approved targeted amendments to its Value-Added Tax regime that expand the tax base across several sectors while keeping the headline VAT rate unchanged and preserving exemptions for essential goods and priority social services. The measures, adopted in July 2025 and now entering implementation, form part of a wider effort to mobilize domestic revenue, streamline incentives, and align compliance with the country’s digital tax transformation.
The package concentrates on sectors with historically narrow coverage or complex exemptions. Construction and contracting services face clearer VAT liability, closing long-standing gaps that created uneven treatment between materials and services. Real estate-related transactions have been tightened to reduce arbitrage between taxable and exempt supplies. In energy, previously inconsistent treatment has been rationalized, including a clarified 10% VAT for crude oil, while certain media and advertising services—such as news agencies—now fall under a standard 14% rate. Selected excisable categories, including tobacco and alcoholic beverages, have been recalibrated to protect revenue and reflect health externalities. Businesses in the affected sectors are being advised to review contracts, pricing models, and cash-flow assumptions as invoices and payments transition to the updated rules.
Equally important is what the reform does not change. The general VAT rate remains in place, and exemptions continue for essentials such as basic foodstuffs, healthcare, and education services. Officials have also emphasized that the reform is aimed at widening coverage and improving equity—rather than imposing across-the-board increases—so that comparable activities bear comparable VAT treatment.
The amendments dovetail with Egypt’s broader digitization agenda, including mandatory e-invoicing and real-time reporting requirements that are gradually extending across business-to-business and public-sector transactions. That digital spine is central to the reform’s success: by standardizing invoice data and reducing manual processing, the tax authority can enforce the new rules consistently while accelerating refunds and limiting disputes. Companies that have already embedded e-invoicing workflows and product-tax mapping will find the operational shift far easier than those still reconciling paper documentation.
Timing and transitional mechanics matter. The law was issued in mid-July 2025 and became effective the following day, leaving finance teams to navigate cut-over periods for projects and long-term contracts. Because VAT is transaction-based, the tax point—supply, invoice issuance, or payment, depending on the scenario—will determine which set of rules applies. Businesses should also expect enhanced audit attention on sectors newly brought into scope and on supplies that move from exempt or zero-rated treatment to the standard rate.
For policymakers, the reform advances a longstanding objective: mobilize more stable, non-oil revenue by broadening the base and paring back exemptions that distort competition. International institutions have encouraged this direction, noting that Egypt’s fiscal consolidation depends more on a wider base and better compliance than on higher rates. If implemented consistently and supported by clear guidance, the VAT amendments can improve neutrality across sectors, reduce litigation risk, and deliver a more predictable environment for investors and exporters.
Source: Middle East Briefing, “Egypt Introduces VAT Amendments to Broaden Tax Base,” 3 July 2025.
