- On 23 October 2025, Egypt’s Ministry of Finance issued Decree Nos. 417 and 418, amending the Value-Added Tax (VAT) Law to expand recoverability rules, clarify compliance obligations, and introduce new provisions for contracting and construction services, effective from 24 October 2025.
- Decree No. 417 broadens the definition of recoverable indirect inputs to include construction and financing costs, updates VAT recoverability rules for inventory, and modifies the tax rates on alcoholic beverages, while Decree No. 418 establishes transitional rules for ongoing construction contracts amid the VAT rate shift from 5% to 14%.
- Taxpayers are urged to evaluate the implications of these changes on their transactions and compliance strategies, particularly regarding ongoing contracts and input VAT recovery processes in light of the new regulations.
Source EY
VAT Law Amendments: New Rules for Construction Contracts and Tax Obligations in Egypt”Law No. 157 of 2025 amended the VAT law, raising VAT on building and construction activities from 5% to 14%.
- Decree No. 418 of 2025 details implementation procedures, contract impacts, tax obligations, and deduction rules.
- For ongoing contracts before 18 July 2025, VAT is calculated on 36% of the invoice value at 14%, with no input VAT deduction allowed.
- If the main contractor remits VAT, subcontractors are exempt if a certificate is provided.
- New or renewed contracts are fully subject to 14% VAT, with input VAT deduction permitted, and the responsible party must remit VAT at the new rate.
Source: taxathand.com
- Egypt’s Minister of Finance issued two decrees amending VAT regulations to simplify compliance, especially for construction contracts signed before Law No. 157/2025 took effect.
- Key changes include expanded VAT deductibility for indirect inputs, clarified accounting rules for legacy contracts, and extended VAT suspension for disassembled production lines.
- These reforms support Egypt’s IMF-backed fiscal agenda, aiming to boost revenue, modernize tax administration, and achieve EGP 3.1 trillion in total revenues for FY2025/2026.
Source gov.eg
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
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