MPs gave their final approval yesterday to three tax-focused draft laws aimed at expanding tax breaks for SMEs, simplifying tax procedures, and settling disputes.

The House approved a new tax system for SMEs that proposed that businesses with an annual turnover of up to EGP 20 mn will pay a tax rate — ranging from 0.4-1.5% depending on much they are making — that covers income tax, value-added tax, duty tax, and others.

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Lawmakers also raised the turnover threshold for tax breaks from the proposed EGP 15mn to EGP 20 mn to better account for inflation and the depreciation of the pound. The stated purpose of the draft bill is to support the SME sector, while also expanding the tax base and integrating the informal economy.

Incentives for businesses that fall under the income bracket include being exempt from the development fee tax, stamp tax, company registration fees, land registration fees and tax, and fees from inking credit facility and mortgage contracts for five years. These companies will also be able to sell fixed assets and not have to pay tax on any of the capital gains, along with paying out with dividends from the profits of the company without having to pass on any to the tax man.

MPs also approved giving a second chance to those that missed previous payments, with the draft legislation enabling taxpayers who failed to submit their tax reports between 2020 and 2023 to file them within a specific time frame without facing any penalties. Under the current system, failing to submit tax returns can lead to a EGP 1 mn fine.

A bill to hopefully speed up settling the mountain of tax disputes was also passed, with the aim of expediting the Egyptian Tax Authority’s settling of tax disputes as part of a longer-term move to a digital system.

Déjà vu? We first heard about the proposals in October when Finance Minister Ahmed Kouchuk announced a long list of tax facilities during a presser.

ALSO- The Economic Committee approved a framework agreement with the African Development Bank to phase out LIBOR as a reference interest rate and adopt SOFR in loan agreements between Egypt and the bank.

Sound smart: The London Interbank Offered Rate and the Secured Overnight Financing Rate, known more commonly by their acronyms LIBOR and SOFR are two interest rate benchmarks. The important difference between the two is how they calculate their rates, with LIBOR basing its rate on the estimates given from banks about the interest rates they pay to borrow from each other, while SOFR bases its rates on actual transactions in the USD Treasury repurchase market where investors borrow money for the night using Treasury bonds as collateral. With LIBOR suffering from a lack of transparency and SOFR viewed as a more reliable and data-based alternative, SOFR is slowly replacing LIBOR as the new global standard for loans and other financial services.

AND- Further discussion and votes on the Criminal Procedures Law was pushed to today because of the lengthy session focussed on the tax-related proposals. MPs are expected today to debate and vote on articles 172-209 of the draft law.

CORRECTION- The story was amended on 29 January, 2025.  An older version of this story incorrectly said that the new simplified tax system for SMEs proposed that businesses with an annual turnover of up to EGP 15 mn will pay a simple flat tax. 

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