Egypt introduces significant VAT updates on certain goods and services

• On 17 July 2025, Egypt issued Law No. 157 of 2025, introducing significant amendments to Egypt's VAT Law No. 67 of 2016, effective from 18 July 2025.
• The law outlines the revised VAT obligations for certain goods, such as cigarettes and alcoholic products, services and contracting/construction services.
• The law also aims to broaden the tax base by subjecting the commercial trademark of administrative units, crude oil and certain news/advertising services to VAT.
• It is essential for businesses to assess their VAT obligations in light of the new law.

Executive summary

On 17 July 2025, the Egyptian Parliament issued Law No. 157 of 2025 (Amendment Law), which introduces significant amendments to the original Value-Added Tax (VAT) Law (Law No. 67 of 2016). These changes primarily aim to increase state revenue and enhance financial stability by adjusting taxes on cigarettes and alcohol, while also broadening the application of VAT to include commercial trademarks, crude oil and certain news/advertising services.

The Amendment Law is effective from 18 July 2025.

Background

The Egyptian Parliament initially enacted VAT Law No. 67 on 7 September 2016, establishing an initial framework for the application of VAT for taxpayers in Egypt.

The issuance of the Amendment Law reflects the government's ongoing commitment to expand its revenue streams. The primary objectives in issuing this law include securing funding for budgetary needs, maintaining financial stability, and supporting social programs in areas like health and education, while ensuring compliance with international standards, particularly those set by the World Health Organization.

Key elements of the Amendment Law

Changes in tax application

Cigarettes

In addition to the current 50% VAT of the final consumer's selling price, the fixed tax amounts on cigarettes have been revised based on their selling price according to the following categories:

• Five Egyptian Pounds (EGP5) per pack, previously EGP4.5: applicable for locally manufactured cigarettes with a maximum selling price of EGP48
• EGP7.5 per pack, previously EGP7: applicable for locally manufactured cigarettes with selling prices exceeding EGP48 but not exceeding EGP69, as well as imported cigarettes priced up to EGP69
• EGP8 per pack, previously EGP7.5: applicable for both locally manufactured and imported cigarettes with selling prices exceeding EGP69

Cigarette prices will increase by 12% annually for three years starting 5 November 2025, with the Council of Ministers having the authority to reduce this annual increase based on the Minister of Finance's proposal, considering an analysis of the actual production costs that impact the final selling price to consumers.

Alcoholic beverages

The tax structure has shifted to a fixed-amount basis, eliminating the previous percentage-based calculation. This revised structure applies to the following categories:

• Fresh grape wine
• Grape juice to which alcohol is added to stop fermentation
• Vermouth, other wines and fermented beverages
• Alcoholic beer

The new fixed tax amounts, based on alcohol content, are as follows:

• Alcohol content less than or equal to 8% per hectoliter: EGP2,800
• Alcohol content above 8% and less than 16% per hectoliter: EGP3,600
• Alcohol content above 16% per hectoliter: EGP4,800

The fixed tax amounts will be subject to an annual increase of 15%, starting from the following year, for a period of three years, to be reduced to 12% thereafter.

Contracting/construction

The VAT rate for contracting and construction services (i.e., supply and installations) has shifted from a scheduled tax rate of 5% to a general VAT rate of 14%.

The key benefit in applying the general VAT rate is the possibility of allowing input VAT recoverability, which is not permitted under the schedule tax application.

Expansion of tax base

Commercial trademark

A 10% schedule tax will now apply to 10% of the rental or selling price of commercial trademarks for administrative units, which was previously tax exempt.

Crude oil

Previously exempt from tax, crude oil is now subject to a 10% schedule tax.

News agency services

News agency services, which were previously exempt from VAT, will now be subject to the 14% general VAT rate. Being subject to VAT, the news agency service providers will have the right to deduct input VAT.

Limitation on exemption

Advertisement services

The exemption for advertisement services is now limited exclusively to advertisements seeking donations for treatment and medical care within private, nonprofit hospitals and government institutions.

Implications

Affected taxpayers should review the provisions of the Amendment Law and assess the impact on their current transactions to facilitate compliance.

For additional information concerning this Alert, please contact:

Ernst & Young Egypt, Cairo

• Ahmed El Sayed, MENA Global Compliance and Reporting Leader 
• Hossam Nasr, Global Compliance and Reporting 
• Ahmed Abo El Fotouh, Global Compliance and Reporting 
• Heba Wadie, International Tax and Transaction Services 
• Dina Adel, International Tax and Transaction Services
  

Ernst & Young LLP (United States), Middle East Tax Desk, New York

• Yuriy Melnyk

For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor