As part of Egypt’s second package of tax facilitation measures, the VAT and Development Fee Reforms introduced significant legislative amendments through, Law No. 149 of 2026 introduced a number of amendments to the Value Added Tax Law No. 67 of 2016, while Law No. 148 of 2026 amended the State Resources Development Fee Law No. 147 of 1984. Both laws were published on 28 July 2026 and form part of the broader 2026 tax reform package.
The VAT amendments focus on supporting industrial production, the healthcare sector and investment, while also improving taxpayers’ cash flow through faster VAT refunds. The amendments additionally revise the VAT treatment of certain goods and services and introduce specific exemptions and preferential treatments.
VAT Relief for Machinery, Equipment and Medical Devices
One of the key measures introduced under Law No. 149 of 2026 concerns machinery, equipment and medical devices used for industrial production.
VAT on qualifying machinery, equipment and medical devices imported or purchased from the local market by factories and production units is suspended for an initial period of one year from the date of customs release or local purchase, as applicable. The Egyptian Tax Authority may accept justified requests to extend this period, provided that the total suspension period does not exceed three years.
Where the taxpayer demonstrates that the relevant machinery, equipment or medical devices have been used in industrial production during the applicable period, the VAT becomes exempt. However, the law imposes restrictions on subsequent disposal: where the assets are disposed of or used for purposes other than those for which the exemption was granted during the following five years, the taxpayer may become liable for the applicable tax.
This mechanism is intended to reduce the upfront VAT financing burden associated with investment in industrial and medical equipment while maintaining conditions designed to ensure that the assets are actually used for the qualifying purposes.
Preferential VAT Rate for Machinery, Equipment and Medical Devices
The 2026 amendments also establish a 5% VAT rate for machinery, equipment and medical devices used in the production of goods or the provision of services, subject to the conditions set out in the law. Buses and passenger cars are excluded from this preferential treatment, while equipment used for medical purposes is treated as medical equipment for purposes of the provision.
This measure is particularly relevant for manufacturers and healthcare-related businesses investing in qualifying equipment, as it reduces the VAT rate applicable to the relevant transactions compared with the standard VAT rate.
Faster VAT Refunds
The amendments introduce a shorter period for taxpayers to become eligible for refunds of excess input VAT.
Under the amended provisions, a credit balance that has remained outstanding for more than four consecutive tax periods may qualify for a refund. For taxpayers benefiting from the incentives and facilitation measures under Law No. 6 of 2025, where annual turnover does not exceed EGP 20 million, the threshold is reduced to more than three months.
The reduction in the refund period is intended to improve business liquidity by allowing qualifying taxpayers to recover excess input VAT earlier. The Egyptian Tax Authority has specifically identified faster VAT refunds as one of the principal measures aimed at supporting businesses and improving cash flow.
VAT Treatment of Transit Services
The 2026 amendments also introduce a specific VAT treatment for services provided in connection with goods in transit.
VAT is not due on goods in transit and services performed on such goods, provided that the transportation takes place under the supervision of the Customs Authority in accordance with the rules prescribed under the Customs Law.
The measure is intended to facilitate transit trade and support Egypt’s position as a regional logistics and trading hub. The Egyptian Tax Authority has highlighted the measure as part of the broader effort to enhance the competitiveness of Egyptian ports and related logistics services.
Expansion of VAT Exemptions
The amendments expand the VAT exemptions applicable to certain healthcare-related products and services.
The exempt items include certain inputs used in the manufacture of dialysis equipment, prosthetic devices and other devices designed to compensate for disabilities or deficiencies, as well as related parts and supplies. The exemption also covers certain products and supplies relating to medical care, including blood and its derivatives, vaccines and sera, incubators, blood-collection bags and family-planning products.
The amendments also extend VAT exemptions to certain financial services provided by the National Postal Authority and to non-banking financial services subject to the supervision of the Financial Regulatory Authority or the Central Bank of Egypt.
These changes are intended to promote greater consistency in the tax treatment of comparable financial services and to reduce the VAT burden on selected healthcare-related inputs.
Real Estate Leasing and VAT
The 2026 amendments also revise the VAT treatment of the leasing and use of real estate.
While certain residential and other specified premises remain outside the relevant VAT charge, the exemption does not generally extend to buildings or units leased as independent premises for conducting business activities. The law provides specific exceptions for premises used for religious, charitable, social, educational and healthcare activities, as well as other cases that may be determined by ministerial decision based on social considerations and the public interest.
Businesses leasing premises for their activities should therefore reassess the VAT treatment of their existing and future lease arrangements in light of the amended rules.
Introduction of a Schedule Tax on Natural Gas
Law No. 149 of 2026 introduces a schedule tax on natural gas at a rate of EGP 20 per thousand cubic feet. The natural gas provision was added to the schedule of goods and services subject to the applicable schedule tax under the VAT Law.
This represents a targeted change to the indirect tax treatment of natural gas and should be considered by businesses engaged in the production, supply or use of natural gas where the relevant tax obligations apply.
Development Fee on Cement
Law No. 148 of 2026 amends the State Resources Development Fee Law No. 147 of 1984 and introduces a development fee on cement.
The fee has been set at EGP 35 for each tonne of cement produced, regardless of the type of cement. Cement manufacturers are required to remit the applicable amount to the Egyptian Tax Authority in respect of their cement production.
The amendment therefore creates a specific and clearly defined development-fee obligation for cement manufacturers, which should be incorporated into their tax and financial reporting processes.
Practical Implications for Businesses
The 2026 VAT reforms require businesses to reassess several areas of their VAT position, particularly where they operate in the industrial, healthcare, logistics, real estate or financial services sectors.
Industrial businesses investing in machinery and equipment should assess whether their purchases qualify for the VAT suspension and subsequent exemption, while ensuring compliance with the applicable use and disposal conditions. Businesses with significant VAT credit balances should also consider the revised refund periods and assess the potential cash-flow benefits.
Healthcare businesses should review the expanded exemptions applicable to medical equipment and related inputs, while logistics operators should assess the new treatment of transit-related services. Companies involved in real estate leasing and natural gas activities should similarly review the revised VAT and schedule-tax provisions.
Cement manufacturers should also account for the newly introduced EGP 35-per-tonne development fee when assessing the financial and tax implications of production.
Compliance and Implementation Considerations
Although the amendments establish the principal tax treatment, their practical application will also depend on the relevant executive rules and administrative procedures. In particular, businesses seeking to benefit from the VAT suspension and exemption for machinery, equipment and medical devices should maintain appropriate documentation demonstrating the qualifying use of the assets.
Taxpayers should also ensure that their accounting systems, VAT returns, invoicing procedures and supporting documentation reflect the revised treatment from the effective date of the amendments.
The Egyptian Tax Authority has emphasized that the VAT reforms form part of the broader objective of simplifying the tax system, supporting investment and production, and improving the efficiency of VAT administration.
Conclusion
The 2026 VAT and development fee reforms introduce a combination of targeted relief measures, revised tax treatments and new obligations across several sectors of the Egyptian economy. The measures provide greater VAT relief for qualifying industrial and medical equipment, accelerate VAT refunds, expand healthcare-related exemptions and introduce specific treatments for transit services, real estate leasing and natural gas.
At the same time, the introduction of the EGP 35-per-tonne development fee on cement creates an additional cost and compliance consideration for cement manufacturers.
Businesses should therefore review the amendments in light of their specific activities and transaction structures, update their VAT and accounting processes where necessary, and monitor the relevant implementing rules and Egyptian Tax Authority guidance to ensure proper application of the new provisions.
Frequently Asked Questions
What are the new VAT changes in Egypt for 2026?
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Egypt’s VAT amendments under Law No. 149 of 2026 introduce tax relief for machinery and medical equipment, faster VAT refunds, expanded exemptions, and revised VAT rules for real estate leasing, transit services, and natural gas.
What is the VAT rate on machinery in Egypt in 2026?
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Qualifying machinery, equipment, and medical devices are subject to a preferential 5% VAT rate. Certain equipment used in industrial production may also qualify for VAT suspension and subsequent exemption, subject to specific conditions.
How long does a VAT refund take in Egypt in 2026?
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Under the 2026 amendments, excess input VAT outstanding for more than four consecutive tax periods may qualify for a refund. Eligible small businesses with annual turnover not exceeding EGP 20 million may qualify after more than three months.
Which goods and services are VAT exempt in Egypt?
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Egypt’s 2026 VAT exemptions cover selected medical supplies, vaccines, blood products, disability-related equipment, qualifying transit services, and certain financial services regulated by the Central Bank of Egypt or Financial Regulatory Authority.
Is commercial rent subject to VAT in Egypt in 2026?
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Under the amended VAT rules, buildings and units leased as independent premises for business activities are generally subject to VAT. Certain exceptions apply to properties used for religious, charitable, educational, social, and healthcare purposes.
What is the new cement development fee in Egypt?
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Under Law No. 148 of 2026, Egypt introduced a development fee of EGP 35 per tonne of cement produced, regardless of cement type. Cement manufacturers must remit the applicable fee to the Egyptian Tax Authority.
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