eg-sme-tax

Egypt — Simplified / SME Tax Regime (Law No. 6 of 2025 + Law No. 152 of 2020)

This skill covers Egypt's turnover-based integrated simplified tax system (النظام الضريبي المتكامل المبسط) introduced by Law No. 6 of 2025, plus the underlying MSME Development Law No. 152 of 2020 (قانون تنمية المشروعات المتوسطة والصغيرة ومتناهية الصغر). It is written for small self-employed people, freelancers, professionals (أصحاب المهن الحرة), sole proprietors, and small companies whose annual turnover does not exceed EGP 20 million.

Respond in the user's language. If the user writes in Arabic, reply in Arabic and keep the native legal terms (e.g. رقم الأعمال = turnover, الإقرار الضريبي = tax return, مصلحة الضرائب المصرية = Egyptian Tax Authority).

1. Quick Reference

Quick Reference

Field	Value
Country	Egypt (EG)
Regime	Integrated simplified tax system — turnover-based (الضريبة على رقم الأعمال)
Eligibility	Annual turnover ≤ EGP 20,000,000 (whether or not registered for tax)
Tax basis	% of annual turnover (not net profit) — 0.4% to 1.5% by band
Currency	EGP (Egyptian Pound)
Legislation	Law No. 152 of 2020 (MSME Development Law) + Law No. 6 of 2025 (integrated simplified system)
Authority	Egyptian Tax Authority — ETA (مصلحة الضرائب المصرية)
Portal	eta.gov.eg
Effective date	Law No. 6 of 2025: published 12 Feb 2025, effective 1 March 2025
Commitment	Locked into the regime for 5 years from the request date
Quality tier	Research-verified — pending sign-off by an Egyptian accountant
Version	1.0

Turnover-band income tax rates (Law No. 6 of 2025)

Turnover-band income tax rates (Law No. 6 of 2025)

Annual turnover (EGP)	Income tax rate (% of turnover)
Less than 500,000	0.4%
500,000 to less than 2,000,000	0.5%
2,000,000 to less than 3,000,000	0.75%
3,000,000 to less than 10,000,000	1.0%
10,000,000 to less than 20,000,000	1.5%

The income tax is a flat percentage of annual turnover (إجمالي رقم الأعمال السنوي), not taxable profit. The band is determined by the year's turnover.

Rates corroborated across multiple Big-4 / law-firm alerts (EY, WTS, and Egyptian law firms). Verify the current band rates against ETA and the Executive Regulations before filing, as Executive Regulations and ministerial decrees can refine bands.

Conservative defaults

• Default to general income-tax system unless opted in — Default to the general income-tax system unless the user confirms they have formally applied to and been accepted into the Law 6/2025 regime. The regime is opt-in by request — it is not automatic. (Conservative defaults)
• Default to higher band near boundary — Default to the higher band if turnover is near a band boundary. (Conservative defaults)
• Assume VAT registration required — Assume VAT registration is still required at the standard EGP 500,000 registration threshold — Law 6/2025 simplifies VAT filing frequency, it does not abolish VAT. (Conservative defaults)
• Assume e-invoicing mandatory — Assume e-invoicing / e-receipt compliance is mandatory to keep the incentives. (Conservative defaults)
• Assume 5-year lock-in applies — Assume the 5-year lock-in applies once enrolled — do not advise the user they can freely exit. (Conservative defaults)
• Never compute final liability without sign-off — Never compute a final liability without a credentialed Egyptian accountant sign-off. This skill is research-verified, not authority-certified. (Conservative defaults)

2. Eligibility & Enrolment

Who can join the Law 6/2025 simplified system

• Eligible activities — Any project / activity — commercial, industrial, service, or professional (مهنة حرة) — including freelancers and sole proprietors. (Law No. 6 of 2025)
• Annual turnover cap — EGP 20,000,000 EGP (Law No. 6 of 2025)
• Applies regardless of prior registration — Applies whether or not the person is already registered for tax (the law explicitly targets the informal sector / غير المسجلين to bring them in). (Law No. 6 of 2025)
• Companies and natural persons qualify — Companies as well as natural persons qualify, subject to the same turnover cap. (Law No. 6 of 2025)

How to enrol (via ETA)

• Enrolment steps — 1. Register / update registration with the Egyptian Tax Authority (eta.gov.eg). 2. Submit a formal request to benefit from Law 6/2025 (طلب الانتفاع بأحكام القانون) through the ETA portal. 3. Integrate with ETA electronic systems — e-invoice (الفاتورة الإلكترونية) and/or e-receipt (الإيصال الإلكتروني) as applicable. 4. Maintain simplified books and file the special simplified returns on time. (eta.gov.eg)
• 5-year commitment start — Once accepted, the taxpayer is committed for 5 years counting from the day after the request is submitted — withdrawal before then is generally not permitted. (Law No. 6 of 2025)

Relationship to Law No. 152 of 2020 (MSME definitions)

• Law 152/2020 purpose — Law 152/2020 is the development / classification law; it defines enterprise size by turnover (and by capital for newly incorporated firms). (Law No. 152 of 2020)
• Micro (متناهية الصغر) — turnover < EGP 1 million EGP (Law No. 152 of 2020)
• Small (صغيرة) — turnover EGP 1 million to < EGP 50 million (industrial/service classification varies) EGP (Law No. 152 of 2020)
• Medium (متوسطة) — turnover EGP 50 million up to EGP 200 million EGP (Law No. 152 of 2020)

Verify the current Law 152/2020 size bands — they were set by executive decree and have been updated. Law 152/2020 grants development incentives and registration with the MSME Development Agency (جهاز تنمية المشروعات); the turnover tax itself flows from Law 6/2025. The two operate together: the tax simplification (Law 6) targets the ≤ EGP 20m segment that overlaps the micro/small categories under Law 152.

Refusal catalogue

Refuse or escalate (do not silently produce a number) in these cases:

• R-EG-1 — Over threshold — Turnover exceeds EGP 20m (outside the growth cushion). The taxpayer belongs in the general system; refuse to apply turnover rates. (R-EG-1)
• R-EG-2 — Artificial fragmentation — The user appears to have split one business into several entities to stay under EGP 20m. The law excludes this; refuse and warn it is an abuse risk (تجزئة المشروع). (R-EG-2)
• R-EG-3 — Client-concentration exclusion — Consultancy / professional arrangements where ~90%+ of revenue comes from one or two clients may be excluded (anti-disguised-employment). Flag and require verification. (R-EG-3)
• R-EG-4 — Not enrolled — The user has not submitted the request to benefit. Do not apply the regime; default to the general system. (R-EG-4)
• R-EG-5 — Mid-commitment exit request — User wants to leave within 5 years. Explain the lock-in; do not assume they can exit. (R-EG-5)
• R-EG-6 — Out-of-scope taxpayer — Free zones, special economic zones, oil & gas, banks/insurance, or entities barred by sector rules. Refuse and refer to a credentialed Egyptian accountant. (R-EG-6)
• R-EG-7 — Prior-year liabilities / open audits — Settlement of past dues and the "waiver" provisions have their own deadlines and conditions; refuse to opine on amnesty without ETA confirmation. (R-EG-7)
• R-EG-8 — No credentialed sign-off — Always required before filing — never present output as final. (R-EG-8)

3. Turnover-band Rates & What Taxes Are Replaced / Exempted

The core mechanic

• Income tax formula — Income tax under the regime = turnover × band rate (see §1 table). There is no profit computation, no depreciation schedule, no expense substantiation for the income-tax charge — the rate already embeds an assumed margin. This is the main attraction: predictability and almost no accounting overhead. (§1 table)

Taxes / charges exempted or removed for the enrolled taxpayer

Under Law 6/2025, qualifying enterprises are relieved from a bundle of taxes and fees, reported consistently across Big-4 and law-firm alerts:

• Stamp duty exemption — Stamp duty (ضريبة الدمغة) on the enterprise's contracts/instruments. (Law No. 6 of 2025)
• State Financial Resources Development Fee exemption — State Financial Resources Development Fee (رسم تنمية موارد الدولة). (Law No. 6 of 2025)
• Notarisation / registration fees exemption — Notarisation / registration fees for articles of association and contracts. (Law No. 6 of 2025)
• Capital gains tax exemption — Capital gains tax on the sale of machinery, equipment, and fixed assets. (Law No. 6 of 2025)
• Dividend tax exemption — Tax on dividends (ضريبة الأرباح الموزعة) distributed within the regime. (Law No. 6 of 2025)
• Withholding/advance-payment removal — Withholding tax (الخصم تحت حساب الضريبة) and advance-payment systems at source — the enterprise is taken out of these collection mechanisms. (Law No. 6 of 2025)

Growth cushion (تجاوز الحد)

• Within 20% excess, single event — If turnover exceeds EGP 20m once within the 5-year window by no more than 20%, the enterprise keeps the benefit at the 1.5% band for one additional year. (Law No. 6 of 2025)
• Above 20% or repeated breach — If the excess is above 20%, or the threshold is breached repeatedly, all reduced-tax benefits are revoked from the following year and the taxpayer moves to the general system. (Law No. 6 of 2025)

Audit / inspection deferral

• 5-year audit deferral — Income tax and VAT returns of an enrolled enterprise are not inspected (audited) until 5 years have passed from the request date, provided the taxpayer stays compliant. This is a major compliance relief, not a permanent exemption. (Law No. 6 of 2025)

4. Simplified VAT & Filing Under the Regime

Filing comparison table

Return	Standard system	Under Law 6/2025
VAT (ضريبة القيمة المضافة)	Monthly	Quarterly — filed within one month after the quarter-end, with payment
Income tax (ضريبة الدخل)	Annual, profit-based, complex	Annual simplified return on a special template, turnover-based
Payroll / wage tax (ضريبة كسب العمل)	Monthly remittance + reconciliation	Obligation limited to the annual settlement declaration plus remittance
Withholding tax	Periodic	Removed (enterprise taken out of the WHT/advance-payment system)

The regime simplifies filing cadence, not the existence of the taxes.

Key VAT points

• VAT registration still applies — VAT registration still applies at the general turnover threshold (EGP 500,000 — verify current value). Law 6/2025 changes how often you file, not whether you must register. (VAT Law No. 67 of 2016)
• Standard VAT rate — 14% % (verify current; certain goods/services have special rates such as the 5% machinery rate or the schedule/table-tax items) (VAT Law No. 67 of 2016)
• E-invoicing/e-receipt precondition — E-invoicing / e-receipt integration is a precondition for staying in the regime — non-compliance can forfeit the incentives. (Law No. 6 of 2025)

Confirm the VAT registration threshold (EGP 500,000) and the 14% standard rate against the current VAT Law (Law 67/2016 as amended) and ETA before relying on them.

5. When the Simplified Regime Beats the General System

Because the turnover tax is charged on gross turnover regardless of profit, it favours high-margin, low-cost activities (typical of freelancers and professionals) and can hurt low-margin, high-cost activities.

Break-even logic

• Break-even comparison — Compare: - Simplified tax = Turnover × band rate (e.g. 0.5% for a EGP 1.5m freelancer). - General income tax = Net profit × progressive personal income tax rate (top brackets reach roughly the high-20s/30s percent — verify current 2026 brackets, which were widened by the 2025 reforms). The simplified regime wins whenever: Turnover × band_rate < Net_profit × effective_general_rate Rearranging, the simplified regime is cheaper when your net margin exceeds: break-even margin ≈ band_rate / effective_general_rate Because band rates are tiny (0.4%–1.5%) and the general top rate is large, the break-even margin is very low — for most genuinely profitable freelancers and small service businesses, the simplified regime is dramatically cheaper.

The general system can still win when:

• The business runs at a loss or near-zero margin (turnover tax is payable even on a loss; income tax on a loss is nil and losses may carry forward).
• The business has very high deductible costs (e.g. trading/reselling with thin markups), making the effective profit-based charge lower than 0.4%–1.5% of turnover.
• The taxpayer values loss carry-forward and capital allowances that the simplified flat charge ignores.

Always weigh the non-tax benefits: no audit for 5 years, no WHT/advance payments, quarterly (not monthly) VAT, exemptions from stamp duty / development fee / capital gains / dividends — these reduce cost and friction even when the headline tax is close.

Remember the 5-year lock-in (§2): a taxpayer who expects to scale past EGP 20m soon, or to swing into losses, should model multiple years before committing.

6. Worked Examples

All figures illustrative. Confirm bands, rates, and the user's enrolment status before relying on any number. Verify the 2026 general income-tax brackets.

Example 1 — Freelance software developer (high margin)

• Turnover: EGP 1,500,000; costs: EGP 150,000; net profit: EGP 1,350,000.
• Band: 500k–<2m → 0.5%.
• Simplified income tax = 1,500,000 × 0.5% = EGP 7,500.
• General system (illustrative ~25% effective on EGP 1,350,000) ≈ EGP 337,500.
• Simplified wins overwhelmingly. Plus quarterly VAT, no WHT, 5-year no-audit.

Example 2 — Small consultancy near the top band

• Turnover: EGP 12,000,000; net profit ~EGP 4,000,000.
• Band: 10m–<20m → 1.5%.
• Simplified income tax = 12,000,000 × 1.5% = EGP 180,000.
• General system (illustrative ~22.5% on EGP 4m) ≈ EGP 900,000.
• Simplified still wins by a wide margin given the healthy margin.
• R-EG-3 check: if 90%+ of that EGP 12m comes from one client, the consultancy may be excluded — flag before proceeding.

Example 3 — Low-margin reseller (general system may win)

• Turnover: EGP 9,000,000; net profit only EGP 200,000 (thin 2.2% margin).
• Band: 3m–<10m → 1.0%.
• Simplified income tax = 9,000,000 × 1.0% = EGP 90,000.
• General system (illustrative ~20% effective on EGP 200,000) ≈ EGP 40,000.
• General system is cheaper here — turnover tax punishes the thin margin. Recommend modelling both and getting accountant sign-off before enrolling.

Example 4 — Growth-cushion breach

• Year 3 turnover spikes to EGP 22,000,000 (10% over EGP 20m), first breach.
• Within the 20% tolerance and a single event → keeps 1.5% band for one more year: tax ≈ 22,000,000 × 1.5% = EGP 330,000.
• If next year turnover hits EGP 26m (30% over) → benefits revoked from the following year; move to the general system. Apply R-EG-1.

Example 5 — Micro freelancer (lowest band)

• Turnover: EGP 400,000; net profit EGP 360,000.
• Band: <500k → 0.4%.
• Simplified income tax = 400,000 × 0.4% = EGP 1,600.
• Note VAT registration threshold (EGP 500,000 — verify) is not yet crossed, so VAT registration may not be required. Income-tax personal exemptions under the general system might also produce a low charge — compare and confirm.

7. Tier 2 + Reference + Test Suite

Tier 2 — escalate to a credentialed Egyptian accountant when

• Turnover is within ~10% of any band boundary or of the EGP 20m cap.
• The activity may be excluded (client concentration, fragmentation, regulated sector). See R-EG-2, R-EG-3, R-EG-6.
• There are prior-year liabilities, open audits, or amnesty/settlement questions (R-EG-7).
• The taxpayer is considering exit within the 5-year lock-in (R-EG-5).
• Cross-border income, free-zone/SEZ status, or non-resident issues arise.
• VAT registration status, schedule-tax (table-tax) items, or special VAT rates are involved.

Reference (verify each before filing)

• Law No. 6 of 2025 — integrated simplified tax system; published Official Gazette 12 Feb 2025, effective 1 March 2025. Plus its Executive Regulations and any ETA implementing decrees.
• Law No. 152 of 2020 — MSME Development Law (size definitions; development incentives via جهاز تنمية المشروعات).
• Income Tax Law No. 91 of 2005 (as amended) — the general system.
• VAT Law No. 67 of 2016 (as amended) — VAT rate (14%) and registration threshold (EGP 500,000) — verify current values.
• Egyptian Tax Authority — eta.gov.eg — portal, enrolment request, e-invoicing/e-receipt, return templates.
• Corroborating professional commentary used for this skill: EY Global tax alert, WTS, and Egyptian law-firm alerts (2025).

Test suite (self-checks)

1. Q: Freelancer with EGP 1.2m turnover — which band? → 0.5% (500k–<2m).
2. Q: EGP 2.5m turnover band? → 0.75% (2m–<3m).
3. Q: EGP 8m turnover band? → 1.0% (3m–<10m).
4. Q: EGP 15m turnover band? → 1.5% (10m–<20m).
5. Q: EGP 25m turnover, second breach — eligible? → No, apply R-EG-1.
6. Q: Is the tax on profit or turnover? → Turnover (gross رقم الأعمال).
7. Q: How often is VAT filed in the regime? → Quarterly.
8. Q: Can the taxpayer leave after 2 years? → No — 5-year lock-in (R-EG-5).
9. Q: Is dividend tax due on distributions within the regime? → No (exempted).
10. Q: Is enrolment automatic? → No — must submit a request to ETA (R-EG-4).
11. Q: Low-margin reseller, 2% margin, EGP 9m — does simplified always win? → No, compare with the general system (Example 3).
12. Q: 90% of revenue from one client — proceed? → Flag R-EG-3 (exclusion risk), escalate.

PROHIBITIONS

• Do NOT present any tax figure as final or filed without sign-off from a qualified Egyptian accountant (محاسب قانوني / EGP-credentialed tax advisor).
• Do NOT assume a taxpayer is in the Law 6/2025 regime — confirm they have submitted and had accepted the request to benefit.
• Do NOT advise structuring or splitting a business to stay under EGP 20m (fragmentation is excluded and is an abuse risk — R-EG-2).
• Do NOT tell a taxpayer they can freely exit before 5 years.
• Do NOT treat the turnover tax as covering VAT, payroll tax, or registration obligations — those still exist (with simplified cadence).
• Do NOT apply the regime to over-threshold, regulated-sector, or free-zone/SEZ taxpayers (R-EG-6).
• Do NOT quote rates, thresholds, the VAT rate, or income-tax brackets as settled without verifying against ETA and the Executive Regulations — flag anything unconfirmed with "verify current value".
• Do NOT opine on amnesty/settlement of prior-year dues without ETA confirmation (R-EG-7).

Disclaimer

This skill is research-verified against the Egyptian Tax Authority (eta.gov.eg), Big-4 (EY) and reputable Egyptian law-firm and tax-advisory publications on Law No. 6 of 2025 and Law No. 152 of 2020, current to May 2026. It is not a substitute for professional advice and has not yet been signed off by a qualified Egyptian accountant. Egyptian tax law, the Executive Regulations of Law 6/2025, band rates, thresholds, the VAT rate/threshold, and the general income-tax brackets are subject to change by decree. Always verify current figures with ETA and obtain sign-off from a credentialed Egyptian tax professional before filing or relying on any output. Provided by openaccountants.com as open-source guidance, without warranty.