EXCLUSIVE- Preferential tax rates in the SMEs Act will give small businesses incentives to go legit, a government official with knowledge of the bill tells us. The plan would see businesses pay tax at a fixed rate over a three-year term regardless of revenue growth, according to the following bands:

• Revenues up to EGP 250k: A flat tax of EGP 1k (instead of EGP 2k)
• Revenues between EGP 251-500k: EGP 2.5k (instead of EGP 5k)
• Revenues between EGP 501k-1 mn: EGP 6k (instead of EGP 10k)
• Revenues between EGP 1-5 mn: EGP 50k
• Revenues between EGP 5-10 mn: EGP 100k.

The tax bands will be reassessed at the end of the three-year term, the source said. Companies will pay the standard 22.5% corporate tax rate after they have incorporated, while sole traders will be taxed under the progressive tax system to which individuals are subject.

Government entities will also be working to issue licenses and ensure SMEs are included in tenders, government auctions, and banking facilities, the source added. The SME tax incentives package will cost the government EGP 1.5-2 bn each year, Trade Ministry Advisor Hisham Ragab told the local press earlier this week.