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The gov’t is working on amending the VAT Law: The Finance Ministry is moving to reduce tax exemptions under the Value Added Tax (VAT) Law, with the government looking to review goods currently exempt from the law and limit goods subject to special tax treatments, either higher than the standard VAT rate — such as telecommunications and cars — or lower at 5%, three government sources told EnterpriseAM.
The measure comes as part of our reform program with the International Monetary Fund, one source said, adding that applying different tax rates instead of the standard 14% prevents businesses from deducting VAT on input costs. This, in turn, leads to manufacturers paying a higher tax and the consumer bearing the full tax amount.
Unifying the 14% VAT rate across most goods has long been a demand of the business community, one source said, adding that Saudi Arabia, for example, has implemented VAT on all goods and services at a flat rate of 15% without exceptions.
What’s been done so far: The government has reviewed 20 of the 56 tax-exempt goods, with the aim of gradually removing all exemptions, the sources said. Sugar, tea, and coffee are among the goods that are expected to be removed from the list of exemptions, while taxes on oils and detergents will also be adjusted to reflect inflationary pressures. The changes will require legislative amendments, which are expected to be presented to the House of Representatives soon, with implementation likely before the start of FY 2025-26.
It’s all about simplifying procedures: While the amendments will generate additional tax revenue, the sources emphasized that the primary goal is to correct tax distortions and simplify procedures.
The amendments will not affect the VAT registration threshold — currently set at EGP 500k — despite requests from the business community to increase the threshold. The Finance Ministry won’t alter any core provisions of the law, including the tax rate.
DATA POINT- The government is hoping to reach EGP 1.8 tn in tax revenues by the end of the fiscal year in June, with VAT making up EGP 719 bn of that sum. Tax revenues grew by 30% y-o-y in fiscal year 2023-24 to record EGP 1.49 tn.
