The Finance Ministry has issued the amended executive regulations for the VAT Act, which contain new targeted tax breaks designed to support manufacturing and boost exports. The amendments were published in the Official Gazette late last week.

The provisions are aimed at:

#1- Supporting capex in the industrial sector: Purchases of machinery by companies in the industrial sector will be exempt from VAT for one year. This applies to items imported from abroad or purchased locally. Machinery is usually subject to a 5-14% VAT, the Tax Authority’s director of taxpayer services, Mohsen El Gayar, told Enterprise.

#2- Boosting investment in economic zones: Goods or services purchased for projects in special economic zones are exempted from VAT.

#3- Encouraging tourists to spend: Tourists will now be able to claim VAT rebates on select items worth EGP 1.5k or more, down from EGP 5k previously.

#4- Making it easier to register with the Tax Authority: The amendments introduce simplified procedures for non-residents to register with the Tax Authority, which can now be done online and without the need of a legal representative.

This is the latest in a list of measures designed to support the economy, boost investment and increase exports in response to the economic crisis triggered by the war in Ukraine and tightening financial conditions. The Madbouly cabinet announced in the wake of the latest currency devaluation last week that it would continue offering subsidized loans at a slightly higher 11% rate to support companies in the industrial and agriculture sectors. It also recently made it easier for firms to acquire on-stop golden licenses for new industrial and infrastructure projects

Industry + exports are key to getting the economy on the right foot for the long term: The government is aiming to increase exports to USD 100 bn a year by the middle of the decade and reduce dependency on imported products, a move that would help narrow the current account deficit. This would leave us with more resilient local industries that can weather external shocks like the fallout from covid-19 and the Russia-Ukraine war.

REMEMBER- Expect more tax changes in the weeks ahead: The Madbouly government is set to unveil its tax policy document in the coming few weeks, which could see changes made to income and capital gains tax.