SMEs are getting a slew of tax incentives as part of new tax reform: A new package of tax incentives for SMEs aimed at helping small businesses grow and easing the administrative burden of monitoring them are soon to be released as part of the government’s new tax reform package. Deputy Finance Minister for Taxes Sherif Al Kilani sat down with Enterprise to discuss the details of this new package at length.

The details:

  • Businesses with an annual turnover of up to EGP 15 mn will pay a simple flat tax and will not be audited for five years.
  • Such businesses will submit quarterly VAT returns instead of monthly VAT returns.
  • Labor income taxes will be settled annually, rather than 17 times a year — 12 monthly settlements, four quarterly, and one annual.
  • Tax leniency on stamp tax, capital gains tax, dividends, real estate registration fees, and other tax obligations.
  • Leniency for erroneous returns filed between 2020 and 2023, which can be corrected and refiled without penalty.

The Finance Ministry’s reform package represents a major shift in dealing with taxpayers, Al Kilani said, similar to the government’s 2005 Income Tax Law, which led to a significant increase in revenue and taxpayer confidence.

Incentivizing the use of online tax registration: The gov’t is willing to provide comprehensive technical support, tax amnesty, simplified procedures, and the removal of small fines, Al Kilani said, in exchange for one commitment — that small businesses register their transactions online with the help of service providers and technical support.

Encouraging voluntary compliance from a growing informal sector: Al Kilani noted that with a growing informal economy, inspection and monitoring committees have found a significant number of previously unknown, would-be taxpayers that are not registered in any tax system. However, legal actions against them have been suspended in conjunction with the release of the new reforms in order to encourage voluntary compliance, Al Kilani added.

The professional sector is among the first targets of the program, given the high levels of total and partial evasion within the sector that need to be addressed. The goal is not just to increase revenue, but to achieve tax justice in society, according to Al Kilani, who pointed out that “our goal is to focus on large projects and organize small businesses by incorporating them without burdening them significantly.”

The business community will get its say on the new reforms: Once the Finance Ministry finalizes its SME tax reform package, it will be presented for input to the business community, industrial unions, chambers of commerce, and investors. Al Kilani clarified that the ministry is open to any request from the business community and will issue reforms in response to what is discussed in the meetings, saying that the ministry “aims to facilitate investment, open a new page of trust that leads to greater tax compliance, allow people to grow their businesses in the future, and foster economic activity without tax-related pressures or burdens.”

Raising tax exemption limits are on hold for now: The gov’t needs to study the financial impact of raising tax exemption limits before going ahead with such a move, particularly in light of current inflation indicators and targets, Al Kilani said. However, we could see this happen in the new fiscal year or at another time, as indicated by the results of the study, Al Kilani added.

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