Egypt Unveils Simplified Tax System for Small Businesses

Simplified Tax System for Small Projects Launched by Egyptian Tax Authority

The Ministry of Finance, in collaboration with the Egyptian Tax Authority (ETA), has introduced a comprehensive tax facilitation package aimed at streamlining tax procedures, resolving disputes, and easing compliance for small businesses. The announcement was made by Rasha Abdel Aal, Head of the ETA, in response to requests from the business community.

Key Features of the Simplified Tax System

The initiative focuses on small businesses with an annual turnover of up to EGP 15 million, providing them with an integrated tax system under a single legal framework. This approach is designed to encourage businesses in the informal economy to transition into the formal sector while fostering voluntary tax compliance.

Abdel Aal highlighted that the system simplifies procedures, reduces administrative burdens, and offers clear guidelines for small businesses, enabling their growth and integration into the formal economy.

Benefits for Small Businesses

 

1. Tax Exemptions:

   • A five-year exemption from stamp taxes, documentation, and registration fees for company contracts and financing guarantees.

     • Exemption from capital gains taxes on the sale of assets, machinery, or production equipment.

     • Exemptions on profit distributions for projects complying with the system's provisions.

2. Simplified Tax Procedures:

   • Businesses are exempt from tax deduction and advance payment systems, opting instead for a simplified income tax model based on a flat or proportional rate tied to their turnover.

     • Annual tax declarations for commercial, industrial, or professional activities are tailored to the needs of businesses under this system.

3. VAT Filing:

   • VAT declarations will be required quarterly instead of monthly, reducing the administrative workload for small businesses.

4. Record-Keeping:

   • Simplified record-keeping practices will replace the detailed bookkeeping required under the Income Tax Law.

5. Compliance and Review:

   • Businesses joining the system will undergo a review after five years, contingent on compliance with electronic invoicing and receipt systems in line with ETA regulations.

6. Wage Tax Declaration:

   • Wage tax compliance is streamlined, requiring only the submission of an annual tax settlement declaration under the Unified Tax Procedures Law.

Encouraging Growth and Formalization

Abdel Aal emphasized that the package is structured to help small businesses thrive while transitioning into the formal economy. The streamlined system consolidates all tax regulations into one unified framework, incorporating tax treatments, exemptions, and growth-oriented incentives.

“This system provides a smoother experience for small businesses, fostering an environment where they can expand and contribute to the national economy more effectively,” Abdel Aal stated.

Long-Term Vision

The initiative reflects Egypt’s broader efforts to modernize its tax infrastructure, encourage digital transformation, and reduce the compliance burden on small businesses. By introducing such measures, the government aims to create a more inclusive and supportive environment for small enterprises, contributing to economic stability and sustainable growth.

This simplified tax system underscores the ETA’s commitment to supporting small businesses while ensuring compliance through efficient and accessible processes. It represents a pivotal step in formalizing Egypt’s economy and fostering the growth of its entrepreneurial ecosystem.

 

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