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Egypt Planning to Reduce Corporate and Individual Income Tax Rates and Introduce VAT

Egypt's economic ministers have reportedly agreed to reduce the corporate and individual income tax top rates from 30% to 22.5%. The standard corporate tax rate and top marginal individual tax rate of 25% were increased in 2014 by 5% for taxpayers with income over EGP 1 million. The increase was to last for 3 years, but is no longer seen as needed.

The new rates are also expected to apply to business established in special economic zones after the change comes into effect. However, business currently enjoying a reduced rate of 10% in special economic zones will continue to enjoy the benefit.

In addition to the change in the income tax rates, Egypt is also preparing to implement a new value added tax (VAT) regime.

Nearly a year after the announcement that value added tax (VAT) legislation was being drafted, Egypt will soon introduce the legislation with an expected implementation in 2016. VAT will replace Egypt's current general sales tax regime, which applies to locally manufactured and imported goods, as well as certain services. Some of the expected aspects of the new VAT regime include:

  • VAT will apply on all goods and services, including imports
  • Although not yet set, a single standard rate of VAT will apply between 10% and 15%, as well as reduced rates and exemptions for certain supplies
  • Operations in Free Zones will be subject to VAT to limit tax evasion, but a special VAT refund mechanism for inputs used in Free Zones and connected to export operations will be introduced
  • Certain goods and services will be zero-rated, including exports, goods imported and intended for use outside Egypt, temporary imports used for repairs, goods for international transport, and goods and services imported for military purposes
  • A reverse charge will apply for non-resident suppliers, whereby the purchaser will account for and pay VAT

Additional details will be published once available.

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