Egypt's Simplified Tax Regime for Small Enterprises: Full Guide

Executive summary

• By default, a legal person pays income tax at 22.5% of net annual profit, and a natural person pays progressive rates, with monthly VAT returns, withholding and advance payments on account of tax, and regular books. Law 6 of 2025 is an elective regime that changes each of these for an enterprise that applies.
• It is open to enterprises, including professional activities, whose annual turnover does not exceed EGP 20 million, on electronic application — it does not apply automatically.
• Tax is charged as a percentage of turnover, not of net profit, from 0.4% to 1.5% by band (Article 10).
• An enterprise that applies may not withdraw before five years. It is outside the withholding and advance-payment systems, its dividend distributions are not subject to dividend tax, and its capital gains on disposing of fixed assets, machinery and production equipment are exempt.
• It files a separate annual return; its VAT return covers each three months and is filed with payment, not monthly; and its salary-tax obligation is limited to the annual settlement return, filed with payment in January.
• Its returns are not examined until five years have passed from the date of the request, and it keeps simplified registers and books instead of regular books.

Who may enter, and who may not

Law 6 of 2025, in force from 1 March 2025, applies to enterprises whose annual turnover does not exceed EGP 20 million and which apply to benefit from it, including professional activities, whether or not they were registered with the Egyptian Tax Authority (the Authority) when the law took effect (Article 1). Turnover is established by any of four criteria (Article 2): for an enterprise registered when the law took effect, the last final assessment or the last return not yet assessed by that date; for one registering later, the return it files; or the data available through the e-invoice or e-receipt system. The test is turnover, regardless of legal form or headcount, and classification under the MSME Development Law 152 of 2020 is irrelevant: Article 15 of Law 6 of 2025 repealed that law's articles that levied tax on turnover (Articles 85 to 87 and 93 to 99). A natural person outside this regime is taxed on the progressive brackets set out in Personal income tax brackets in Egypt.

The law does not apply in two cases (Article 4): professional consultancy activities that derive at least 90% of their annual turnover from providing professional consultancy to one or two persons; and enterprises that commit any act or conduct intended to come under the law without entitlement, including dividing or splitting an existing activity without economic justification, the burden of proving which lies with the Authority. The Minister of Finance may, by decision, exempt some activities from the first case.

Applying, and the five-year commitment

The regime does not apply automatically: an enterprise must submit an electronic request on Form 1/10 (requests) through the Authority's website (Article 1 of Ministerial Decision 420 of 2025). To benefit from its incentives it must file its returns on time, join the Authority's electronic systems, including the e-invoice or e-receipt as the mandatory phases reach it, and issue the prescribed invoices or receipts (Article 3 of the law). Neither the law nor the Decision sets a deadline for the request. An enterprise may not withdraw its request before five years have passed, counted from the day after it was filed (Article 5); withdrawal after that needs a separate request, on Form 1/11 (requests) (Article 1 of the same Decision).

Tax by turnover band

The rate table is the backbone of the regime (Article 10):

The base is turnover, not net profit, and no cost is deducted from it. The band's rate applies to the whole turnover, not only to the part falling within the band: turnover of EGP 4 million bears 1% of it, EGP 40,000. An enterprise whose turnover exceeds EGP 20 million in any year within five years of its request, by no more than 20% (that is, up to EGP 24 million), and only once, continues at the top band's rate (1.5%); exceeding it by more, or again within that period, ends its participation from the following year.

Effect on other taxes

Enterprises under the regime are not subject to the withholding-tax or advance-payment systems under the Income Tax Law 91 of 2005 (Article 11). The Authority's Executive Instructions No. 25 of 2025 apply this both ways: payers do not withhold from amounts paid to the enterprise, and the enterprise need not withhold from amounts it pays. Dividend distributions from their activity are not subject to the tax otherwise charged on distributions (Article 9), which by default is 10%, or 5% where the securities are listed on the Egyptian Exchange (Articles 46 bis 2 and 56 bis of the Income Tax Law, as amended by Laws 30 of 2023 and 151 of 2026). Capital gains on disposing of their fixed assets, machinery or production equipment are exempt (Article 8). They are also exempt from the state resource-development fee, stamp duty, and notarisation and registration fees on "contracts of incorporation of companies and enterprises, and credit-facility and mortgage contracts connected with their business, and other guarantees provided to obtain financing," and on contracts to register the land needed to establish them (Article 7).

Returns, examination and simplified records

The regime has its own separate annual return (Form 20 (returns) under Decision 420 of 2025), filed within the deadlines of the Unified Tax Procedures Law 206 of 2020 (Article 12). Its VAT return is different: it is "filed every three months, on the form prepared for the purpose, within the month following the end of that period, together with payment of the tax" (Article 12) — four times a year, instead of the monthly return that applies by default (Article 31 of the Unified Tax Procedures Law). The most significant practical simplification is in salary tax: for tax on salaries and similar income, the enterprise's obligation "is limited to filing the annual tax-settlement return provided for in the Unified Tax Procedures Law... together with payment of the tax" (Article 12) — one return, with the tax paid alongside it, instead of monthly remittance (Article 14 of the Income Tax Law) and quarterly returns (Article 31 of the Unified Tax Procedures Law). The settlement return is filed during January of each year (the same Article 31). This improves cash flow during the year. Its income-tax and VAT returns are not examined until five years have passed from the date of the request (Article 12). The enterprise is exempt from the records, books and documents required under the Unified Tax Procedures Law, in exchange for a simplified system set by Decision 420 of 2025: a fixed-asset register and a raw-material inventory register; sales and purchases day-books and a tax-summary book; and the e-invoice or e-receipt, on paper or electronically (Article 13 of the law, and Article 3 of the Decision). Law 150 of 2026 kept this exemption when it restated the general duty to keep regular books "without prejudice to the provisions of Law No. 6 of 2025" (Article 38 of the Unified Tax Procedures Law).

What this requires

• Compare the tax due under both regimes over the last two actual years before applying — the request cannot be withdrawn for five years.
• Track actual turnover every year to avoid exceeding the threshold by more than 20%, or repeatedly.
• Set the salary tax aside monthly even though payment is annual, so the January liability is not a surprise.
• Join the Authority's electronic systems, including the e-invoice or e-receipt as the mandatory phases apply, and file on time — conditions of staying in the regime, not only of entering it.
• Keep the two registers and three books of the simplified system instead of regular books, on paper or electronically.
• An enterprise previously taxed under the repealed articles of Law 152 of 2020 enters this regime only on request; its non-final taxes for periods from 1 January 2023 to the end of the tax period before March 2025, if its turnover does not exceed EGP 10 million, are assessed under Article 4 of Law 151 of 2026.

The firm's Tax Department compares the two regimes for each enterprise, prepares the election request, and follows up its returns and simplified records afterwards.

Mahmoud Nassef, Founder Partner
Chartered Accountant, Ministry of Finance, Egypt

Member, Egyptian Society of Accountants & Auditors
Member, Egyptian Tax Society
Member, Egyptian Society for Public Finance and Taxation

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Disclaimer: This bulletin is prepared for general information on the legislation in force at the date of its publication. It does not constitute a professional opinion or tax or legal advice on any particular matter, and it should not be relied upon in place of advice based on an examination of the circumstances of each case. Nassef & Partners International accepts no responsibility for any action taken, or refrained from, in reliance on its contents. The positions stated remain subject to subsequent legislation and decisions.