New Tax Incentives for SMEs in Egypt 2026

Tax Incentives for SMEs in Egypt show how taxes remain a main pillar of the modern economy and support the state budget. However, increasing economic challenges, both locally and globally, call for the development of tax systems to meet the needs of the local market and support the growth of the national economy. In this context, the Egyptian government launched two new laws in 2025, namely Law No. 6 and Law No. 7, which bring with them a set of amendments and tax facilities that aim to enhancing the investment climate and raising the efficiency of the country’s tax system.

The new laws, which are specifically targeted at small and medium-sized enterprises, represent an important step towards stimulating the private sector and increasing tax compliance. These reforms include easing tax procedures, such as simplifying the tax system and reducing administrative complexity, making it easier for companies to comply with tax laws without the need for large resources or complex processes. These reforms also provide greater opportunities for small businesses to join the formal economy, broadening the tax base and attracting more domestic and foreign investment.

Law No. 6 of 2025

Law No. 6 of 2025 is a paradigm shift in the tax policies of SMEs in Egypt, as the law aims to simplify and facilitate tax procedures for this vital segment of the economy. SMEs are one of the main drivers of the Egyptian economy, as they represent a large percentage of the country’s business volume and directly contribute to the creation of job opportunities and promote economic growth. They are also the key pillar for stimulating innovation and local growth, and contribute significantly to reducing unemployment. Therefore, this law came to provide a favorable tax environment that encourages these enterprises to continue and grow.

Objectives of the Law

The main objective of Law No. 6 of 2025 is to reduce the tax burden on small and medium-sized enterprises , which reflects positively on stimulating the private sector and increasing investments in this sector. These projects are considered one of the main pillars of any country’s economy, especially in Egypt, as they contribute significantly to job creation and economic growth. Supporting these projects is also one of the key factors that can help stimulate innovation and creativity in the national economy.

The overall objective of the law is to simplify tax procedures and provide incentives for small enterprises, especially those operating in the informal sector. The law encourages these enterprises to join the formal tax system, thereby reducing the size of the informal economy and achieving tax justice. In doing so, the law seeks to provide greater opportunities for SMEs to grow and stay in the market, at a time of global and domestic economic pressures.

The objectives of the law are summarized in the following points:

• Reducing the tax burden on SMEs: The law aims to reduce the financial burden on SMEs, which helps them survive and grow, and gives them the opportunity to invest in their expansions and enhance their competitiveness in the local and international market.
• Incentivizing unregistered enterprises to register in the formal tax system: The law provides clear and appropriate incentives for SMEs operating in the informal sector, encouraging them to join the formal tax system and increasing the level of tax compliance.
• Increased Tax Compliance: The law provides tax incentives for enterprises that commit to filing tax returns on time, which promotes an increase in the tax base and generates better revenues for the state treasury.
• Encouraging investment in small enterprises: By improving the legal and tax environment, the law enhances the ability of small enterprises to attract investments, thereby supporting economic growth and increasing job opportunities.

The Most Prominent Tax Facilities Provided by the Law

The tax facilities in Law No. 6 of 2025 come in the form of incentives that enable SMEs to grow and expand in a less complex and more flexible tax environment. These facilities include the following points:

• Simplified Tax System: The law provides for a simplified tax system that allows establishments with annual revenues not exceeding EGP 20 million to apply a tax system based on the percentage of revenues instead of taxing profits. This system makes it easier for small businesses to understand and apply their tax obligations without the need for complicated procedures or additional costs. Thus, the obstacles that these enterprises may face when filing tax returns or calculating taxes due are reduced.
• Tax Exemptions: The law includes a number of important tax exemptions for small and medium-sized enterprises, most notably the exemption from capital gains tax resulting from the sale of fixed assets and equipment. The exemption also includes the dividend tax that may be imposed on companies when distributing dividends to shareholders. These exemptions encourage companies to invest profits in developing and expanding their operations rather than allocating them to paying taxes.
• Deferral of Tax Examination: One of the most prominent facilities offered by the law is the five-year tax exemption, which gives small business owners a greater opportunity to focus on developing their business without worrying about extensive tax checks. These facilities contribute to reducing the financial and administrative pressure on small enterprises, giving them the opportunity to grow and expand under a concessional tax environment.
• Electronic Accounting Support: The law provides technical support for the implementation of electronic accounting systems, which contributes to improving the efficiency of tax compliance for SMEs. Through these systems, small business owners can track their accounts more accurately and transparently, enhancing the process of filing tax returns on a regular basis. These systems also contribute to reducing accounting errors and tax manipulation, making it easier for the tax authority to effectively monitor tax compliance.

Law No. 7 of 2025

Law No. 7 of 2025 comes to provide substantial amendments to the Unified Tax Procedures Law, as it aims to improve tax justice and simplify procedures between financiers and the Tax Authority, and these amendments are centered on the following:

1. Tax Penalties Capped: 

Fines for late payment of taxes have been capped at not exceeding 100% of the amounts due, providing greater certainty to financiers.

2. Tax Reconciliation Mechanisms:

Amendments have been introduced to allow reconciliation in tax crimes before or after the filing of a criminal lawsuit in exchange for the payment of specific compensation.

3. E-payment Facilities:

Emphasizes the need to use e-payment in all tax transactions, which enhances transparency and reduces unrecorded cash transactions.

Impact of Tax Breaks

The tax incentives under Laws No. 6 and 7 of 2025 are expected to be particularly beneficial for SMEs, as they contribute to improving the business environment and facilitating the establishment and expansion of businesses. Some of the expected impacts are as follows:

• Encouraging Informal Enterprises to Join the Formal System: By simplifying procedures and offering tax exemptions, the number of small businesses transitioning from the informal sector to the formal sector is expected to increase.
• Increasing Investments in the Egyptian Economy: Tax incentives are expected to attract more domestic and foreign investments, stimulating economic growth and creating more job opportunities.
• Improved Tax Compliance: Streamlining the tax system contributes to increased voluntary compliance, as financiers find themselves less vulnerable to excessive penalties and fines.

Challenges of Implementing Tax Accommodations

Despite the significant benefits of these facilities, there are several challenges that may face their implementation on the ground:

• Legal Awareness and Tax Education: Some small business owners may have trouble understanding the ins and outs of the new laws.
• Fully Implementing Digital Transformation: The implementation of the e-tax system requires robust infrastructure and ongoing technical support for small enterprises.
• Compliance Control: Although procedures are simplified, there must be an effective control system in place to ensure that the tax system is not manipulated or circumvented.

Conclusion

Law No. 6 and Law No. 7 of 2025 are an important step towards the development of Egypt’s tax system. By providing tax concessions to small and medium-sized enterprises, lawmakers seek to stimulate the growth of this vital sector, thereby contributing to strengthening the national economy. Although there are some challenges in implementation, tax reforms contribute to greater tax fairness and an improved business climate in Egypt.

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