Egypt VAT: commercial leases now taxable at 14% (Law 149 of 2026)

The letting of a unit taken as an independent premises for managing an activity is now subject to VAT at the general rate of 14%, even if it has adopted a trade sign and has a connection with customers, while sales remain exempt from VAT in every case. The change comes from Law 149 of 2026 amending certain provisions of the Value Added Tax Law issued by Law 67 of 2016. Law 149 was published in the Official Gazette, issue 30 bis (A), on 28 July 2026 and took effect on the following day. Its article 2 replaced items 19, 20, 28, 32, 35 and 36 of the list of goods and services exempt from VAT that accompanies Law 67. It is one of seven laws published in the same issue of the Official Gazette; all seven are reviewed together in Egypt's July 2026 tax package.

The change reaches landlords and tenants alike: the landlord in its registration and invoicing, both parties in the rent under leases already running, and a registered tenant in deducting the VAT charged on the rent. Law 149 leaves untouched the table tax that serial 15 of the Schedule of goods and services imposes on the "trade sign and connection with customers" as a component of a shop or administrative unit, equal to 1% of the rent or price, even where the sale or letting is exempt from VAT. That tax does not reach every shop and unit: in 2025 the Minister of Finance and the Egyptian Tax Authority (the ETA) stated that it applies to shops and administrative units in malls and specialised commercial centres, and that those in ordinary locations are not subject. As at 29 October 2026 we had found no regulation or ETA instruction to that effect.

Item 28 as replaced

Before the amendment, item 28 exempted "the sale and letting of vacant land, agricultural land, buildings and residential and non-residential units" (unofficial translation), without distinguishing between one non-residential use and another. As replaced, it reads:

"The sale and letting of vacant land, agricultural land, buildings and residential units, and the sale and letting of non-residential buildings and units, save for the letting of buildings and units taken as an independent premises for managing an activity even if they have adopted a trade sign and have a connection with customers; excluded from this are buildings and units taken as premises for managing religious, charitable, social, educational and health activities, and such other activities as are designated by a decision of the Minister upon the proposal of the competent Minister for social necessities required by considerations of the public interest."

Sales were left untouched. Letting is the whole of the amendment. For VAT, the provision does not turn on what the unit is, whether a shop, an office or a warehouse, but on the purpose for which it is taken: whether it serves as an independent premises for managing an activity. Table tax turns, as the government and the ETA have stated it, on the shop or administrative unit being in a mall or specialised commercial centre, as set out below.

The text adds the words "even if they have adopted a trade sign and have a connection with customers", the same two terms that serial 15 of the Schedule uses to name the element of a shop or administrative unit that bears table tax. A unit taken as an independent premises for managing an activity does not leave the charge because it has that character or that connection, and an office from which a company is run falls within it. The law does not define an "independent premises for managing an activity", or say whether a unit in which the activity itself is carried on is one, and as at 29 October 2026 we had found nothing in the executive regulations that does. The question on each lease is therefore whether the unit is taken as an independent premises from which an activity is run, not whether it is residential.

Letting of buildings and units used as premises for religious, charitable, social, educational and health activities is excluded from the charge. The text allows further activities to be designated by a decision of the Minister of Finance upon the proposal of the competent Minister, for social necessities required by the public interest. As at 29 October 2026 we had found no decision adding other activities.

What is taxable and what is not

Table tax on shops and administrative units

Alongside item 28 stands serial 15 of part One of the Schedule of goods and services annexed to Law 67, the part covering goods and services subject to table tax only. Law 3 of 2022 added it for shops alone; Law 157 of 2025 replaced its text to bring in administrative units, with effect from 18 July 2025:

"Trade sign and connection with customers (a component of the shop or the administrative unit) at (10%) of the rental or sale value, as the case may be", with "value" as the unit of collection and a rate of 10%.

The tax is 10% of a base equal to 10% of the rent or price, which is 1% of the rent or price. Table tax is charged on the sale of the goods and services listed in the Schedule (article 1 of Law 67). Because the serial sits in the part for items subject to table tax only, the tax does not depend on the sale or letting being subject to VAT, and Law 149 did not amend it. Table tax is not deductible (item 1 of the fourth paragraph of article 22 of Law 67, as replaced by Law 3 of 2022).

The tax does not reach every shop and administrative unit. The text does not define its scope, and as at 29 October 2026 we had found nothing on it in the executive regulations and no ETA instruction. The government and the ETA did, however, state how they interpret it when Law 157 of 2025 was debated.

The Minister of Finance told the House of Representatives "that all shops and units outside malls and specialised commercial centres are not subject, under both the previous and the proposed position", and that the tax is 1% of the sale price or the rent invoice (House of Representatives Bulletin, issue 20, 29 June to 8 July 2025, p. 10). The ETA's statement published on the Ministry of Finance website on 29 June 2025 announced "the continued non-subjection of all shops and administrative units in ordinary locations 'that do not have the character of a trade sign'", and "the subjection of administrative units in locations with a trade character, such as malls and commercial centres, to the tax at 1% of the sale or rental value", to treat them in the same way as shops.

On that interpretation the tax is due on the sale or letting of a shop or administrative unit in a mall or specialised commercial centre, and not on shops and units in ordinary locations, under both the 2022 and the 2025 text. It is a stated interpretation, not a binding text. The text also leaves room for a narrower interpretation confined to the transfer of a business itself, with its trade sign and connection with customers, by sale or by letting it as a going concern, because real property is not an element of a business even when the trader owns it (articles 34 and 36 of the Commercial Code issued by Law 17 of 1999).

The dates matter here. Item Second of article 78 of the executive regulations of Law 67, as issued by Minister of Finance Decree 66 of 2017, excluded from the exempt non-residential units "businesses (المحال التجارية) under Law No. 11 of 1940", the law on the sale and pledge of businesses. The ETA applied that to "shops that have a known name and are prepared in advance by the lessor for a particular activity", such as shops in malls, hotels and clubs (ETA Instructions 23 of 2017), so their letting was subject to VAT. That exclusion outlasted the addition of serial 15 on 27 January 2022 until Minister of Finance Decree 24 of 2023 removed it with effect from 12 January 2023. A transaction completed before that date is judged by the text then in force.

For the letting of a shop or administrative unit in a mall or specialised commercial centre taken as an independent premises for managing an activity, now taxable at 14%, Law 149 does not say whether table tax is also due or how the two taxes apply to the same rent.

Other provisions of Law 149

Beyond item 28, the law carries provisions with wider practical effect for industrial businesses. Machinery, equipment and medical devices used in producing a good or rendering a service carry VAT at 5%, by exception from the general rate, other than buses and passenger cars (first paragraph of article 3 of Law 67, as replaced).

The tax due on machinery, equipment and medical devices imported or bought on the local market by factories and production units for use in industrial production is suspended for one year from the date of release or purchase, which the ETA may extend, for reasons it accepts, by further periods not exceeding three years in total (article 28 bis of Law 67, as replaced).

If the ETA is satisfied that the items were used in industrial production within that period, they are exempted; the industrial producer may then not dispose of them for purposes other than those for which the exemption was granted during the five years following the exemption without notifying the ETA and paying the tax due according to their condition and value and the rate in force at the date of payment. If the period lapses without use in industrial production, the tax and the additional tax fall due from the date of customs release or purchase until the date of payment.

Law 3 of 2022 had added article 28 bis for machinery and equipment only, and Law 149 brings in medical devices and raises the ceiling on extensions from one year to three years. Rules and procedures for the suspension already exist in article 34 bis of the executive regulations, added by Minister of Finance Decree 24 of 2023, but they were written for the earlier text of article 28 bis, and as at 29 October 2026 we had found no decision amending them for medical devices or the new extension periods.

The provisions of Law 149 also include the refund of a credit balance carried for more than four consecutive tax periods, other than the credit balance of taxpayers within Law 6 of 2025 on certain tax incentives and facilities for projects whose annual turnover does not exceed twenty million pounds, for whom more than three months suffices (item 3 of the first paragraph of article 30 of Law 67).

A new serial 17 was added to part One of the Schedule of goods and services subject to table tax: natural gas, per thousand cubic feet, EGP 20. Serials 8 and 10 of part One of that Schedule were repealed.

What we recommend

As at 29 October 2026 we had found no decision amending the executive regulations to implement Law 149.

• Review live leases of non-residential units, identify those over a unit taken as an independent premises for managing an activity, and apply article 11 of Law 67 to them. The price of a contract concluded between taxable persons, or where one party is a taxable person, and in force when the tax is imposed is adjusted by the amount of the tax burden. Article 12 of the executive regulations extends this to continuing contracts, limits it to the part performed after the law takes effect, and applies it "without prejudice to the terms of the contract"; read each lease's clause on new taxes against that rule. Law 149 contains no transitional provision excluding leases in force.
• Review the landlord's registration position in the light of the rent that is now taxable, its invoicing for that rent, and the point at which the tax falls due. Whoever sells or lets a shop or administrative unit in a mall or specialised commercial centre provides a service listed in the Schedule, and is therefore a taxable person whatever the volume of its transactions (the definition in article 1 of Law 67); registration does not wait for the registration threshold.
• For the tenant: a registered tenant may deduct the VAT charged on the rent from the tax due on its own sales, where it relates to taxable sales, within the limits and conditions of the executive regulations (first paragraph of article 22 of Law 67). The deduction does not extend to input related to exempt goods or services or to table tax (fourth paragraph of article 22 of Law 67), and an unregistered tenant has none.
• Account for table tax under serial 15 on the sale or letting of shops and administrative units in malls and specialised commercial centres, seek the ETA's opinion where a unit falls between a mall and an ordinary location, and state in leases now taxable at 14% who bears table tax if it is held to be due.
• For industrial businesses: consider the suspension available on machinery and equipment, and the five-year restriction on disposal that comes with the exemption.

The firm's Tax Department reviews lease contracts, determines which fall into charge, prepares the resulting adjustments, and follows the implementing decisions as they are issued.

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.