File Photo: Egypt parliament. Al-Ahram
The amendments, approved during a plenary session, are part of the government's broader tax reform programme and the second phase of its tax facilitation initiative, which seeks to simplify tax procedures, improve compliance, enhance transparency, and foster a more business-friendly environment.
They aim to strengthen the country's appeal as a regional logistics and investment hub, while broadening the tax base to support fiscal sustainability.
One of the most significant changes reduces VAT on medical equipment to five percent from 14 percent, extending the preferential rate currently applied to industrial machinery in a move aimed at supporting healthcare investment and local manufacturing of medical products.
The legislation also extends the maximum period for suspending VAT on machinery and equipment imported for industrial production from two years to four years, allowing manufacturers more time to install and operate production lines before qualifying for a tax exemption. The same treatment will apply to machinery used to manufacture pharmaceuticals, blood plasma products, prosthetic limbs, and medical solutions.
To improve business liquidity, the amendments shorten the VAT refund period for excess tax credits from six months to four months. Small enterprises with annual turnover below EGP 20 million will become eligible for refunds after three months under the incentives provided by Law No. 6 of 2025.
In a move to support Egypt's ambition of becoming a regional logistics hub, the parliament also approved exempting services provided to transit goods moving between Egyptian ports from VAT, placing them on the same footing as the transit goods themselves.
The amendments further introduce VAT on the leasing of commercial buildings and administrative units under the standard rate as part of efforts to broaden the tax base.
The parliament said the measure would not increase the tax burden on businesses, as VAT-registered entities will be entitled to deduct the tax, while others may treat it as a deductible expense for income tax purposes. Buildings used for religious, charitable, educational, healthcare, and social activities remain exempt.
The law also exempts kidney dialysis machines, kidney filters, and their components from VAT to reduce costs for healthcare providers and patients.
To align tax treatment across the financial sector, the amendments exempt financial services provided by Egypt Post, banks, companies regulated by the Central Bank of Egypt, and firms supervised by the Financial Regulatory Authority from VAT.
Meanwhile, natural gas has been removed from the list of VAT-exempt goods and services and will instead become subject to a schedule tax of EGP 20 per 1,000 cubic feet, a measure intended to help ease pressure on the state budget.
The legislation also grants domestic manufacturers the right to deduct VAT on locally produced machinery, equipment, and medical devices, placing them on an equal footing with imported products, which already benefit from VAT exemptions.
In addition, soap, household detergents, and gypsum will become subject to the standard 14 percent VAT, enabling manufacturers to claim input VAT deductions following requests from companies operating in those sectors.
According to the parliamentary committee's report, the amendments are designed to improve tax collection efficiency, promote tax fairness, support productive sectors, and strengthen Egypt's investment climate as part of the government's broader fiscal reform agenda.
Egypt’s VAT system is a broad-based consumption tax that replaced the older general sales tax regime in 2016. It is governed by Value Added Tax Law No. 67 of 2016 and administered by the Egyptian Tax Authority under the Ministry of Finance.
The standard VAT rate in Egypt is 14 percent and generally applies to most goods and services. The system also includes exemptions, zero-rated items, and special tax treatment for certain sectors and products, including essential goods and some strategic or socially sensitive items.
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