Egypt Weighs Raising Tax Exemption to EGP 100,000 in Third Relief Package

Egypt's Third Tax Relief Package: The Six Proposals on the Table

Egyptian Senate economic committee secretary Ashraf Abdel Ghani has proposed raising the annual income tax exemption for employees to EGP 100,000 and lifting the VAT registration threshold to at least EGP 3 million. The proposals were presented during a discussion attended by Rasha Abdel Aal, head of the Egyptian Tax Authority, as part of proposals for a third package of tax facilitations.

The meeting was organized by ATC Financial and Tax Consultancy Group, led by Abdel Ghani. The six proposals include a higher employee income tax exemption, justified by the increase in the minimum wage to EGP 8,000 per month, and a new VAT registration threshold, since the current threshold has not changed since the VAT law was issued in 2016 despite significant exchange-rate and inflation shifts.

Other proposals include tax incentives for using sukuk proceeds to pay tax liabilities, full deduction of cash and in-kind donations from the tax base, activation of the competitive neutrality law to create equality between state-owned and private companies, and defining the expected role of tax accountants in the new system. Abdel Aal said the first tax relief package contained 21 measures and the second contained 32 measures, and confirmed that the Tax Authority has begun receiving proposals for the third package.

Abdel Ghani said around one million new taxpayers have voluntarily joined the formal economy, tax revenue has reached about EGP 2.59 trillion, and tax collections rose more than 30% in the first six months of the current fiscal year. Abdel Aal also said digital transformation since 2018 has improved the tax system but is not alone sufficient to solve all challenges.

What the Proposals Would Change for Taxpayers and Business

Why the Income Tax Exemption Proposal Is Tied to Wages

The proposed EGP 100,000 annual exemption is explicitly linked to the EGP 8,000 monthly minimum wage. That framing matters because it positions the tax change as protecting take-home pay for salaried employees, who Abdel Ghani described as among the most compliant categories of taxpayers. If adopted, it would be a direct response to wage increases that would otherwise push more salary income into taxable brackets.

The VAT Threshold Has Been Frozen Since 2016

The call to raise the VAT registration threshold to at least EGP 3 million is built on a longer structural argument. Since the VAT law was issued in 2016, Egypt has experienced sharp currency depreciation and high inflation. That means many small businesses may have crossed the registration threshold simply because their nominal turnover grew, not because their real activity expanded. Raising the threshold would therefore be a correction for inflation and exchange-rate effects, not only a tax cut.

Competitive Neutrality Could Shift the State-Owned Sector Debate

Abdel Ghani wants the competitive neutrality law activated to ensure equality between state-owned companies and private businesses. Abdel Aal said competitive neutrality is a direction of the Egyptian state, not limited to the finance ministry or the Tax Authority, and that it is consistent with international agreements Egypt has signed. If enforced, this would be more than a technical tax issue: it could affect how state-owned enterprises compete with private companies in procurement, pricing and market access.

Trust and Formalization Are the Policy's Real Metric

The discussion emphasised results already achieved: about one million new taxpayers voluntarily entering the formal economy, tax revenue of about EGP 2.59 trillion, and tax collections rising more than 30% in the first half of the current fiscal year. These figures are presented as evidence that the first two relief packages are working. The third package is therefore being framed not as a revenue sacrifice, but as a continuation of a strategy to expand the formal tax base and improve the relationship between businesses and the Tax Authority.

What Egyptian Businesses, Employees and Tax Advisers Should Watch

These are proposals under consultation, not enacted law. The practical implications depend on whether and when the measures are approved.

• Businesses with turnover near the VAT threshold: The proposed EGP 3 million registration threshold is not yet in force. Until the law changes, the existing threshold from 2016 remains applicable, and companies already above it must continue charging and filing VAT as before.
• Wage earners and payroll units: The proposed EGP 100,000 annual income tax exemption is a policy proposal, not a change to payroll withholding. Employers and payroll providers should not adjust tax calculations until the measure is formally enacted.
• Tax accountants and advisers: The Tax Authority has opened consultation for the third package and has specifically discussed defining the accountant's role in the new system. Professionals who want to influence that definition should participate in the consultation process now underway.