The first decree modifies provisions of the VAT law’s executive regulations, while the second sets accounting rules for applying VAT to construction and contracting contracts signed before the enforcement of Law No. 157 of 2025 and still active after its implementation.
These contracts must have been issued with a certified consultant’s statement, electronic invoice, or e-receipt.
The new measures are designed to support taxpayers and strengthen trust between the Tax Authority and the business community, according to Head of the Egyptian Tax Authority Rasha Abdel-Aal.
Among the key changes is an expanded definition of indirect inputs, allowing businesses to deduct VAT on financial and construction-related costs. This includes financing expenses, indirect production and operational costs, sales and distribution expenses, and general administrative overheads.
The decrees also extend the suspension period for VAT payments on disassembled production lines purchased locally or imported in split shipments. The suspension now begins on the date the final component is purchased locally or on the release of the last shipment from customs.
Additionally, the new accounting framework clarifies how VAT should be applied to construction contracts issued before 18 July 2025, the date Law No. 157 took effect, and that are still under execution. The changes are part of broader efforts to streamline tax procedures and support Egypt’s evolving business environment.
Amending the tax system is one of the key sources of revenue for Egypt under the current Extended Fund Facility (EFF) loan programme with the International Monetary Fund (IMF), which finances the ongoing second wave of the country’s economic and structural reforms, totalling $8 billion.
The IMF mission is expected to arrive in Cairo in November for discussions on the completion of the fifth and sixth reviews of the EFF, as well as the first review of the $1.3 billion fresh Resilience and Sustainability Facility (RSF) loan.
As part of its broader fiscal reform agenda under the programme, Egypt is implementing a series of tax policies and administrative measures to boost public revenue and ensure sustainable funding for national development priorities.
The reforms are designed to enhance efficiency, fairness, and transparency across the tax system, while supporting the country’s long-term economic goals.
A key part of this effort is expanding the value-added tax (VAT) base. Recent legislation approved by the parliament extends VAT coverage to additional sectors, including construction, contracting services, crude oil, cigarettes, and alcohol.
The move is expected to generate significant revenue gains and reduce sectoral disparities in tax treatment.
In parallel, the government is working to streamline tax exemptions by phasing out inefficient and distortionary incentives. This step is intended to improve equity across taxpayers and broaden the overall tax base.
Administrative modernization is also underway, with a focus on digitizing tax and customs procedures, lowering compliance costs, and strengthening enforcement. These changes are already contributing to improved operational efficiency and greater confidence in the tax system.
Together, these reforms form part of Egypt’s strategy to enhance domestic revenue mobilization.
By reinforcing the state’s capacity to fund essential services and development programmes, the government aims to maintain fiscal sustainability while advancing its Vision 2030 objectives.
Egypt targets a 23 percent growth of total revenues in the current FY2025/2026, which started on 1 July, to reach EGP 3.1 trillion, up from an estimated EGP 2.5 trillion seen in the fiscal year earlier.
On VAT, taxes on goods and services are projected to rise by 20.8 percent to post EGP 967.9 billion, driven by enhanced electronic tax systems and reduced reliance on manual processing.
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