Gov’t eye solidarity contribution at 0.5-1% of net income, scrapping revenue-based levy and risk of taxing losses

Good afternoon, friends, and welcome to the start of a new workweek. The press has hit the ground running. Our issue today takes stock of the biggest milestones of the year in industry, and we give you a look at what’s in play with the entrepreneurs who bring you your morning cup of coffee.

But first, the news.

THE BIG STORY TODAY-

📍EXCLUSIVE- Government to link solidarity contribution to net income, scrapping revenue-based calculation. The finance and investment ministries are nearing an agreement to restructure the solidarity contribution, shifting the levy from a percentage of gross revenues to a tax on net income, a government source told EnterpriseAM.

The proposal on the table would set the contribution at 0.5% to 1% of net income, payable alongside the annual corporate income tax return. This would replace the current system, which charges 0.025% of revenues.

Why this matters: Under the current revenue-based model, companies are liable for the fee even if they are making losses. The current law treats the contribution as a cost that cannot be deducted, creating an additional burden that erodes capital and liquidity, the source explained, noting that some investors exit the market because they were taxed while bleeding cash.

It has been a tug-of-war over funding. Investment Minister Hassan El Khatib first outlined plans to overhaul the contribution back in September 2024, but the proposal stalled due to pushback from the guardians of the state budget. The solidarity contribution provides roughly 60% of the actual funding for the Universal Health Insurance System. Authorities were hesitant to tweak the formula for fear of creating a funding gap, but a compromise was reached, with the Finance Ministry agreeing to cover any shortfall in revenue resulting from the change to ensure the insurance system’s rollout timeline remains unaffected, we were told.

** Want the full rundown? We will have our full story in tomorrow morning’s issue of EnterpriseAM.

*** It’s Inside Industry day — your weekly Sunday briefing of all things industrial in Egypt. Inside Industry explores what it takes to turn Egypt into a manufacturing and export powerhouse, ranging from initial investment and planning through to product distribution, land allocation, industrial processes, supply chain management, labor, automation and technology, inputs and exports, and regulation and policy.

In today’s issue: A 2025 autopsy of the industrial sectors. How Egyptian manufacturers navigated high costs, supply chain shifts, and a new era of export-first strategies.

☀️ TOMORROW’S WEATHER- We’re (unsurprisingly) in for another cool day in Cairo tomorrow, with temperatures set to peak at just 23°C before cooling down to 12°C, according to our favorite weather app.