The Egyptian tax system has undergone a significant change following the enactment of Law No. 151 of 2026, amending certain provisions of the Income Tax Law No. 91 of 2005. Article 6 of the new law repealed Article 18 of the Income Tax Law, which had provided the legislative basis for issuing specific rules and principles for the tax assessment of small enterprises. In practice, these rules had, over the years, been associated with presumptive assessments and standardized net profit margins for certain activities.
This amendment is not merely the removal of a provision from the law; rather, it reflects a broader shift in the philosophy of tax administration. Tax assessment is moving away from reliance on estimates, assumptions, and standardized profit margins towards greater reliance on data, supporting documentation, actual transactions, and electronic systems.
Why Was Presumptive Tax Assessment a Source of Tax Disputes?
Article 18 previously permitted the establishment of simplified rules and principles for the tax assessment of small enterprises, taking into consideration the nature of their activities. In practice, certain systems and instructions relied on predetermined net profit margins or indicators and criteria to estimate the profits of an enterprise, particularly where sufficient books or supporting documentation were not available.
Although the original objective was to simplify tax assessment for small businesses, the estimation process often became a point of disagreement between taxpayers and the Egyptian Tax Authority. A tax officer might consider the nature and scale of an activity to indicate a certain level of profit, while the taxpayer might argue that its actual costs or business circumstances resulted in lower profits. As a result, the dispute could shift from the actual financial results of the business to the level of profit that was presumed to have been generated.
When announcing the amendment, the Egyptian Tax Authority indicated that the repeal of Article 18 is intended to eliminate presumptive and arbitrary tax assessment and reduce disputes arising from such practices, while expanding reliance on electronic and documentary tax examinations.
An important point to clarify is that the repeal of Article 18 does not mean that all rules and instructions issued pursuant to that provision cease to apply immediately.
Law No. 151 of 2026 expressly provides for the continued application of the rules, principles, and procedures issued pursuant to Article 18 for the 2027 tax period and prior periods. Accordingly, tax periods up to and including the end of 2027 will remain subject, as applicable, to the rules that were previously in effect.
Consequently, the full impact of this transition will become relevant to subsequent tax periods and, in practical terms, from the 2028 tax period onward.
Egypt tax reform
Law No. 151 of 2026 marks a shift in how taxable profits are determined,
with greater emphasis on accounting records, supporting documentation
and electronic transaction data.
Previous approach
Presumptive assessment
Certain assessments could rely on predetermined profit margins,
indicators and estimates, particularly where sufficient accounting
books or supporting documents were unavailable.
Through tax period 2027
Transition period
Rules, principles and procedures previously issued under Article 18
continue to apply, where relevant, to the 2027 tax period and earlier
periods.
From tax period 2028
Data-based assessment
Tax assessment increasingly relies on actual transactions,
accounting records, invoices, supporting documentation and
information available through electronic tax systems.
What this means for businesses
Accurate accounting records, valid supporting documents,
e-invoices and e-receipts will play an increasingly important role
in demonstrating the actual economic results of a business and
supporting its tax position.
Separate regime
Law No. 6 of 2025 remains available
Eligible businesses with annual turnover not exceeding EGP 20
million may continue to benefit from the simplified tax regime,
subject to its applicable conditions.
The repeal of Article 18 changes the assessment framework; it does not
abolish income tax or the separate simplified tax regime available to
qualifying businesses.
From Presumptive Assessment to Assessment Based on Actual Business Results
The new approach means that, as a general principle, the taxpayer’s tax liability will be determined based on the actual substance of the business and the supporting documents and data available, rather than by assuming a standardized or estimated profit margin for an activity whose circumstances may vary significantly from one enterprise to another.
This approach is consistent with the continued expansion of the e-Invoicing, e-Receipt, and digital integration systems, through which the tax administration has increasingly gained access to data relating to sales, purchases, and other transactions. This reduces the need to rely on general presumptive margins when determining taxable profits.
At the same time, however, this transition places greater responsibility on businesses themselves. As the role of estimation decreases, the importance of maintaining an organized accounting system, retaining invoices and supporting documents, substantiating expenses and costs, and accurately recording transactions increases.
Accordingly, proper accounting and digital record-keeping will increasingly become a means of protecting the taxpayer when determining the tax base, rather than merely a formal compliance requirement.
What About the Simplified Tax Regime for Businesses with Annual Turnover Not Exceeding EGP 20 million?
It is important to distinguish between the presumptive tax assessment whose legal basis has been repealed and the simplified tax regime introduced under Law No. 6 of 2025.
Law No. 6 of 2025 introduced a special regime for businesses whose annual turnover does not exceed EGP 20 million, under which income tax is calculated based on specified percentages of turnover, ranging from 0.4% to 1.5%, depending on the applicable turnover bracket.
This regime does not constitute a return to presumptive assessment in its traditional sense. Rather, the legislator has expressly determined the tax payable as a specified percentage of turnover, thereby providing businesses with greater certainty regarding their tax liability. The Egyptian Tax Authority has also emphasized that the regime is intended to simplify procedures and encourage small businesses to join the formal economy.
Accordingly, small businesses may now fall under one of two distinct frameworks, depending on whether they meet the relevant conditions: the simplified regime under Law No. 6 of 2025, for businesses that qualify and elect to benefit from it, or the general income tax regime, which is increasingly moving towards reliance on actual data, accounts, and supporting documentation rather than arbitrary or presumptive assessments.
Impact of the Amendment on Small Enterprises
The abolition of presumptive assessment may have a clear positive impact on businesses that maintain proper accounting records, as they will be better positioned to substantiate their actual business results and expenses rather than being subject to assumed profit margins that may not accurately reflect the economic reality of their activities.
By contrast, businesses that have traditionally operated without a complete documentary and accounting cycle will need to reorganize their practices during the coming period. The transition from presumptive assessment to data-based tax assessment will not necessarily result in lower tax liabilities in every case; rather, it is expected to make the determination of tax more closely connected to the actual economic performance of the business.
This approach is also expected to reduce the scope for personal or subjective disagreements between tax officers and taxpayers regarding the size of the business or the appropriate profit margin. The discussion will gradually shift from the question, “How much is this business presumed to earn?” to the more objective question, “What do the business’s actual data and supporting documents demonstrate?”
Conclusion
The repeal of Article 18 of the Income Tax Law represents an important development in the evolution of the Egyptian tax system. However, it does not mean the abolition of income tax for small enterprises, nor does it mean the elimination of all forms of simplified tax treatment.
The objective is to move away from traditional presumptive and arbitrary tax assessment, while maintaining the previous rules for tax periods up to and including 2027, and gradually transitioning towards a system that relies more heavily on supporting documentation and electronic data from subsequent tax periods.
At the same time, the simplified tax regime introduced under Law No. 6 of 2025 remains available to businesses that meet its applicable conditions.
The key implication of this transition is that proper accounting records, valid supporting documentation, e-invoices, and e-receipts are no longer merely tax compliance requirements. They are increasingly becoming the foundation for determining the appropriate tax liability of a business based on its actual economic activity.
Frequently Asked Questions
What does Law No. 151 of 2026 change in Egypt’s tax system?
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Law No. 151 of 2026 repeals Article 18 of the Income Tax Law, reducing reliance on presumptive tax assessment and shifting toward actual data, supporting documentation, and electronic records.
Has Egypt abolished presumptive tax assessment?
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Yes. The legal basis for presumptive assessment under Article 18 has been repealed. However, the previous rules, principles, and procedures remain applicable to the 2027 tax period and earlier periods.
When will the new tax assessment rules apply in Egypt?
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The full effect of the new approach is expected to apply from the 2028 tax period, as the rules previously issued under Article 18 continue to apply through the 2027 tax period.
How will taxable profits be assessed from 2028?
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Taxable profits will increasingly be determined based on actual business data, accounting records, invoices, supporting documents, e-invoices, and e-receipts rather than standardized or estimated profit margins.
Does Law No. 6 of 2025 still apply to small businesses?
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Yes. The simplified tax regime under Law No. 6 of 2025 remains available to eligible businesses with annual turnover not exceeding EGP 20 million, subject to the applicable conditions.
What should small businesses do before the 2028 tax period?
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Businesses should strengthen their accounting systems, retain supporting documents, accurately record transactions, and ensure compliance with e-invoicing and e-receipt requirements.
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