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Egypt is striving to offer a comprehensive package of incentives to investors, extending beyond tax cuts to include regulatory reforms and infrastructure development. Regarding taxes, the circulating claims about reducing the nominal corporate income tax to as low as 16% or the value-added tax to 0% require careful clarification. While the standard corporate income tax rate is 22.5%1 and the standard VAT rate is 14%, several mechanisms could significantly reduce the effective tax burden. These include:

1. Introduction

Egypt is striving to offer a comprehensive package of incentives for investors, extending beyond tax cuts to include regulatory reforms and infrastructure development. Regarding taxes, the circulating claims about reducing the nominal corporate income tax to as low as 16% or the value-added tax to 0% require careful clarification. While the standard corporate income tax rate is 22.5%1 and the standard VAT rate is 14%, there are several mechanisms that could significantly reduce the effective tax burden. These include:

· Special incentives under the Investment Law

· Simplified tax systems for small and medium enterprises

· Substantial tax advantages in specialised economic zones, most notably:

• The Suez Canal Economic Zone offers a competitive corporate tax rate and VAT exemptions on operations within it.

• The value-added tax system also applies a zero-rate to exports, enhancing the competitiveness of Egyptian products in global markets.

Egypt's attractiveness goes beyond tax incentives to include other competitive advantages, such as relatively low labor costs and a readily available workforce, as well as a reasonable cost of living. The Egyptian government is actively working to improve the business environment by simplifying procedures and reducing non-tax burdens on investors.

2- The evolving investment landscape in Egypt: a government priority

This trend is reflected in recent presidential directives aimed at:

• Replacing the multiple fees previously imposed by various government entities and agencies with a unified additional tax calculated as a percentage of net profit. This shift represents an important step toward simplifying the financial structure of projects and increasing cost predictability, a key demand for investors.

• At the Tax Authority, there are clear initiatives to build a new relationship with the tax community, based on trust and cooperation. A comprehensive guide to tax incentives and facilitations has been announced, aiming to explain all the provisions of the available tax packages and how to benefit from them in a simple and clear manner.

• A comprehensive inventory of non-tax financial burdens imposed on investors is also being prepared, with the aim of alleviating these burdens and enhancing transparency.

• Work is also underway to launch a temporary digital licensing platform offering hundreds of services, in preparation for the establishment of an integrated electronic system covering the entire investment lifecycle.

• Ambitious plans to significantly reduce customs clearance times by the end of 2025, by improving efficiency and removing non-tariff barriers. These practical measures, once fully implemented, will directly contribute to reducing the time and cost required to start and operate a business in Egypt.

. Egyptian corporate tax system

Egypt's corporate tax system is multi-tiered, combining a standard tax rate with a range of targeted incentives and reductions, as well as special regulations for economic zones. This diversity requires investors to have a thorough understanding of the tax framework to determine the actual tax burden on their projects.

3.1. Standard framework for corporate income tax (CIT)

Corporate income in Egypt is generally subject to a corporate income tax. The standard rate is currently 22.5%. This rate serves as the baseline against which all other available tax incentives and reductions are measured. Historical data and future projections indicate relative stability around this rate, providing investors with a degree of certainty regarding general tax policy.

3.2. Corporate tax reaches 16% when special tax incentives are applied.

investment projects can benefit from significant tax reductions that may result in an effective tax rate significantly lower than the standard rate, in some cases approaching or even falling below 16%. A prominent example of this is the Suez Canal Economic Zone, which offers a special tax regime following the application of legally mandated exemptions and incentives.

In addition, there are other incentives within the investment law or sector-specific laws (which will be discussed later) that can significantly reduce the tax base and thus lower the final tax due.

3.3. Main tax reductions and incentives under the Investment Law (No. 72 of 2017 and its amendments such as Law 160 of 2023)

Egyptian Investment Law No. 72 of 2017 and its subsequent amendments, most notably Law No. 160 of 2023, offer a package of significant tax incentives aimed at encouraging new investments and expanding existing ones. The most prominent of these incentives are:

o Deductions from taxable net profits: The law grants a deduction from the taxable net profits of new investment projects established to operate in specific sectors or geographic areas. The percentage of this deduction ranges as follows:

o A 50% discount on investment costs (Sector A): This discount is granted to projects located in the geographic areas most in need of development, as defined by the investment map. These areas typically include Upper Egypt governorates, border governorates, the Suez Canal Economic Zone, and the Golden Triangle.