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Latest Amendments to Egyptian VAT Law

Law No.3 of 2022

Taxes, in general, constitute the most important financial resources for most developing and advanced countries. They directly impact their economies as they are an effective financial tool to finance state expenses and increase the necessary general revenues for providing services to individuals in society.

Value Added Tax (VAT) is one of the most significant types of indirect taxes, which, in principle, applies to all commercial activities and is involved in the production and distribution of goods at every stage. It is a complex tax imposed on the price difference between the cost price and the selling price of goods.

Since the ultimate consumer bears the burden of Value Added Tax, the Egyptian constitution obliges the state to adopt modern systems in the tax system, to review existing tax legislation, and to drive economic development and stimulate investment without adding further burdens to the citizens. This includes determining certain tax exemptions that affect various sectors.

In light of this, the government presented a project amending some articles of the Income VAT Tax Law No. 67 of 2016 on December 12, 2021. The House of Representatives approved these amendments, and Law No. 3 of 2022 was issued.

The most notable amendments included:

  • Subjecting goods and services exported by projects in free zones, cities, and markets outside Egypt, or imported into Egypt, to a VAT rate of zero.
  • Suspension of paying the due tax on imported or locally produced industrial production machinery and equipment for one year.
  • Exemption of services provided by the Suez Canal Authority to transiting ships, including transit fees.
  • Refund of the tax, not exceeding the credit balance, for goods and services eligible for tax deduction.
  • Exemption of family planning methods and medical supplies, including medicines and effective substances used in their production. This includes serums, vaccines, blood bags, and blood derivatives from VAT.
  • Exemption of sewage and water purification and desalination services from VAT.
  • The right for foreign visitors staying in the country for a maximum of three months to refund the previously paid tax to the registered seller, provided that the value of their purchases in a single invoice does not exceed EGP 1,500, as opposed to the previous limit of EGP 5,000.
  • Subjecting commercial and administrative units to a VAT rate of 1% instead of 14%.
  • Exemption of seven types of advertisements from VAT, including informational or public awareness advertisements and “missing” persons and event organization.
  • Exemption of seven types of advertisements from VAT, including informational or public awareness advertisements and “missing” persons and event organization.

Law Reference

To conclude, This article aims to highlight that the Egyptian government is vigorously and swiftly upgrading the tax system, adopting modern systems that ensure efficiency, simplicity, and effectiveness in tax collection to achieve economic stability.

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Written By

Helena Constantine - Partner, Lawyer

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