No penalties for past tax periods for unregistered SMEs if registered soon: Kouchouk

Cairo – January 27, 2025: “Register [on the tax system] within the targeted time, and we won’t hold you accountable for any previous tax periods... we will begin a new chapter together,” said Minister of Finance Ahmed Kouchouk in a recent statement.

To promote compliance with the recently approved tax incentive and relief laws, he urged businesses that have yet to register in the tax system to do so within the designated timeframe, assuring them there would be no penalties for past tax periods.

Responding to the Egyptian Parliament’s approval of the new laws, Kouchouk assured business owners that the government is committed to swiftly implementing the necessary executive measures once the laws are formally passed.  

He emphasized that a neutral monitoring and evaluation system would be put in place to ensure the effective execution of these reforms, and to further improve the overall tax system.

Kouchouk expressed his appreciation for the Parliament's support of the Ministry’s efforts to rebuild trust, foster partnerships, and provide much-needed support to businesses, especially small and medium-sized enterprises (SMEs) and entrepreneurs.

The new tax system, which has been approved by Parliament, includes comprehensive provisions aimed at easing the tax burden on small businesses, entrepreneurs, and professionals.

This simplified system will apply to businesses with annual revenues not exceeding LE 20 million.

The system offers a range of incentives, exemptions, and relief across multiple types of taxes, including income tax, value-added tax (VAT), stamp duties, and development fees.

Kouchouk explained that the system’s primary goal is to reduce the financial strain on small taxpayers, including startups, professionals, and entrepreneurs.

Notable features of the new system include exemptions from stamp duties, development fees, capital gains tax, and dividend taxes. In addition, a simplified proportional tax on annual revenues will be implemented based on the size of the business, eliminating the need for calculating net profits.

The minister further elaborated on how the system would streamline tax procedures for small businesses, including simplified annual income tax filings, easier payroll tax reporting, and quarterly VAT returns instead of monthly filings for businesses with annual revenue under LE 20 million.

The system will also ease record-keeping and documentation requirements and exempt businesses from the withholding tax and advance payments system. Furthermore, the first tax audit will take place after five years, reinforcing the government’s trust in small businesses.

The minister also announced that businesses would have the opportunity to submit or amend their tax returns for the periods from 2020 to 2024 without incurring any penalties or facing sanctions. This move underscores the government’s commitment to supporting businesses and offering them a fresh start.

Additionally, Kouchouk detailed simplified processes for resolving tax disputes, including those arising from estimated tax assessments for periods prior to 2020. Businesses will be able to settle these disputes by paying a percentage of the tax due, with the option to make quarterly payments over the course of a year without facing penalties.

For disputes related to audits of books and accounts from previous years, the Minister confirmed that a 100 percent waiver of delay penalties and additional taxes will apply.

This also extends to individuals seeking to settle disputes regarding property transactions and profits from unlisted stocks. In these cases, the 100 percent waiver will be granted on delay penalties.

Kouchouk also highlighted simplified mechanisms for reconciling tax violations unrelated to actual tax liabilities. For example, businesses that failed to apply the withholding tax system will be able to settle by paying half of the prescribed fine.

These measures are part of the government’s ongoing efforts to create a more business-friendly environment in Egypt, encouraging growth and investment across various sectors of the economy.