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Monday, 18 February 2019

Egypt plans to offer 85% tax exemption to incentivize SMEs to go legit

EXCLUSIVE- More on tax exemptions to encourage small businesses to go legit: The government is mulling exempting small and medium enterprises from up to 85% of their (already low) tax burden for a period of three years in an attempt to incentivize businesses in the informal economy to go legit under the proposed SMEs Act, a senior government official tells Enterprise. According to the source, the exemptions would be applied through a tier system according to each business’ revenues:

  • Businesses with annual revenues of up to EGP 250k would be subject to a flat annual tax rate of EGP 2,000. These companies would enjoy an exemption from 85% of that sum for a period of three years.
  • Companies with annual revenues of EGP 251-500k would be subject to an annual flat tax EGP 5,000 and would be eligible for a 47% tax exemption, also for three years.
  • Businesses with revenues of 500k to EGP 1 mn would be subject to a flat tax of EGP 10k per annum and would be eligible for a 7.5% tax break in the first three years.

Background: Incorporating the informal economy is part of the government’s new revenue strategy, which would offer incentives, including VAT discounts and access to subsidized finance to those who register their businesses and pay taxes, a source told us earlier this month. The government does not have an accurate figure of the size of the informal economy, but the source said unofficial data indicates it is at least as large as the official economy.

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