Egypt’s VAT in 2025: What changed, what the new guidance says, and what businesses must do next

Background — why 2025 matters

Egypt’s VAT system (introduced in 2016) historically combined the general 14% VAT rate with a number of sector-specific treatments (including a “schedule” 5% rate that applied to certain contracting/construction activities). In 2025 the legislature and Ministry of Finance moved to simplify and harmonise the regime, closing gaps and aligning taxable bases and rates with international VAT practice while issuing implementation instructions to help businesses transition.

Key legal / guidance changes (plain language)

1. Amendment of the VAT Law — Law No. 157 of 2025
   The law amended core VAT provisions (place of supply, taxable base definitions and certain compliance rules). This provides the statutory basis for subsequent executive decrees and ETA guidance.

2. Updates to the Executive Regulations — Ministerial Decree No. 417 of 2025
   The Ministry published amendments to the VAT executive regulations to implement the law changes and to set out procedural details. The ETA index of VAT laws lists these instruments.

3. Contracting & construction: end of the 5% schedule tax — moved to 14% standard VAT
   One major practical change: contracting, construction and supply-and-installation activities that were taxed under the 5% schedule tax (or special regime) are now subject to the standard VAT rate (14%). The change allows — in many cases — the recovery of input VAT for contractors under the normal VAT deduction rules (subject to the transitional provisions that distinguish existing contracts from new or renewed contracts). Several advisory firms summarised the operational details and transition mechanics.

4. ETA guidance on digital/non-resident supplies and exported services
   The ETA has consolidated guidance on the place of taxation, zero-rating and documentation requirements for exported services and digital supplies provided by non-residents. The guidance clarifies who can apply the zero-rate, which supporting documents are mandatory, and how to treat cross-border digital platforms. This follows earlier ETA guidance for non-resident vendors and is part of the broader 2025 set of instruments.

Practical implications for businesses

1. Pricing and contracts (construction & contracting)

   • For new contracts: contracting services are generally taxed at 14% — contractors can usually recover input VAT in line with standard VAT rules, so pricing and margin calculations must be revised.

   • For existing contracts: transitional rules often apply (some decrees treat pre-existing performance differently, e.g., specific rules for certificates, staged invoicing or partial taxation bases). Review contract dates, certification and invoicing milestones to identify which tax treatment applies.

2. Cash flow and input VAT recovery

   • Moving to the standard VAT regime generally enables input-VAT deduction, which reduces effective tax cost — but timing matters. Businesses should update cash-flow forecasts and rework supplier agreements accordingly.

3. Invoicing, documentation and e-invoicing

   • Ensure invoices meet ETA requirements for the new rules and retain documentary evidence needed to apply zero-rating for exported services (contracts, proof of supply to non-resident customers, payment trace). Where the ETA guidance specifies mandatory documents, administrative fines can follow incomplete documentation.

4. Non-resident / digital suppliers

   • Platforms and non-resident suppliers that sell into Egypt must follow the ETA’s clarified place-of-tax rules and registration requirements; exported services rules and mandatory documentation have been set out in the recent ETA instructions. Review marketplace arrangements and consider local registration / appointing tax representatives if required.

5. Price to consumers (B2C) and potential inflation effects

   • Expanding VAT coverage or moving activities to the 14% base can raise consumer prices where end-customers cannot recover VAT (e.g., retail buyers of housing). Businesses should model retail pricing impacts and anticipate customer negotiations. (This macro implication was noted by market commentators at the time of the reforms.)

Compliance checklist (what to do now)

1. Identify whether your activities (especially contracting/construction and digital supplies) are affected.

2. Review all contracts dated before/after the legislative cut-off to determine transitional treatment. Collect certificate dates, certified work orders and invoice histories.

3. Update billing templates and ERP to apply the 14% VAT rate where required and to capture required ETA documentation for zero-rated supplies.

4. Reassess input-VAT recovery: confirm eligible inputs and update VAT reconciliation and cash-flow forecasts.

5. If you’re a non-resident or a marketplace/platform operator, verify local registration requirements and maintain export documentation for zero-rating.

6. Speak to your tax adviser about potential refund claims, transitional adjustments and whether voluntary disclosures are needed for prior-period treatments.

Recommendations for tax teams and senior management

• Immediate audit: Perform a VAT-impact audit for 2024–2026 to identify material exposure and recovery opportunities.

• Contract remediation: Amend standard contract templates to state clearly which party bears VAT increases and how certified stages will be invoiced.

• Documentation controls: Strengthen document retention and e-invoicing processes to satisfy ETA guidance on exported services and zero-rating.

• Engage advisors: For complex construction or cross-border service cases, get written positions from a local tax counsel or reputable advisory firm to reduce RISKS of assessment.

Conclusion

The 2025 VAT changes and ETA guidance mark a shift towards a more unified and internationally aligned VAT regime in Egypt. The biggest practical change for many businesses is the reclassification of contracting/construction activities under the standard 14% VAT regime and the clearer rules for exported/digital services. Firms should act now — updating contracts, ERP/invoicing systems, cash-flow models and compliance controls — to minimise disruption and capture input-VAT recovery opportunities.