Egyptian Corporate Tax Guide for SMEs: The 2026 Compliance & Incentive Manual

Understanding the SME Egyptian Tax Framework: What is the Law 152 of 2020 in Egypt?

For years, the biggest hurdle for Egyptian small businesses was the complexity of the standard corporate tax system. Traditional filing required sophisticated bookkeeping and resulted in unpredictable tax assessment outcomes. Law 152 of 2020 changed this by introducing a "presumptive tax" system. Instead of being taxed on net profit (which is often difficult to calculate accurately for micro-firms), enterprises are taxed on a flat, predictable percentage of their annual revenue.

In 2026, this framework remains the most effective tool for tax compliance for any business with a turnover below EGP 200 million. By shifting the focus from profit to revenue, the tax authority removed the incentive for "creative accounting" and replaced it with a transparent roadmap for growth. If you are operating a project in Egypt, understanding your classification under this law is the difference between paying the standard 22.5% corporate tax rate and paying as little as 0.5% of your total sales.

Categorizing Your Enterprise: Micro, Small, and Medium Definitions

The egyptian tax authority uses three strict tiers to determine your eligibility for incentives. These are based on annual turnover, but newly incorporated projects may be classified based on "paid-up capital" during their first two years.

How Law 152 Facilitates Informal Sector Formalization

Many businesses in Egypt previously operated "off the books" to avoid the perceived high cost of income tax companies face. Law 152 addresses this by offering a "Clean Slate" policy. Informal businesses that register under the SME law are granted a temporary license and are exempt from past tax disputes. The tax company is essentially forgiven for previous years in exchange for joining the formal digital economy today.

The MSMEDA Role: Obtaining Your SME Classification Certificate

You cannot simply claim to be an SME. To access tax exemption benefits and simplified rates, you must obtain a classification certificate from MSMEDA. This certificate acts as your "passport" to the SME regime.

The Reality Check: Most founders realize their current income tax burden is 50% higher than it needs to be simply because they haven't applied for this certificate. Without it, the ETA will default you to the standard corporate tax rules under Law 91.

Simplified Tax Rules in Egypt: The 2026 Flat Rate System

For SMEs, the 2026 tax landscape is defined by predictability. Instead of the variable 22.5% corporate tax rate applied to net profit, Law 152 provides a tiered flat-rate system. This removes the administrative friction of justifying every expense to a tax inspector. If your revenue is below EGP 10 million, you are essentially paying a "subscription fee" to the tax authority that scales with your size.

Revenue-Based Taxation

The current system replaces traditional income tax calculations with a straightforward table. Depending on your annual turnover, you pay either a lump sum or a tiny percentage of your total sales. This is a game-changer for tax compliance because it eliminates the risk of unexpected tax assessment bills.

Calculating Your Liability

Calculating your corporate tax under this regime requires only one number: your total annual sales.

The Cost Calculator Technique:

Let’s do the math: If your small factory in Obour generates EGP 8 million in revenue, your income tax companies obligation is exactly EGP 80,000 (1%). Under the standard Law 91 regime, if that same factory made EGP 2 million in profit, you would owe EGP 450,000. By staying within the SME framework, you save EGP 370,000 in cash flow that can be reinvested into new machinery.

Tax Holidays and Exemptions: Stamp Duty, Notarization, and Capital Gains

Beyond the reduced tax rates, Law 152 provides a significant "shield" for your balance sheet. The goal of the egypt tax authority is to lower the barrier for SMEs to scale and restructure.

• Stamp Duty & Notarization: All contracts, loan agreements, and registration documents for your company are 100% exempt from stamp duty and notarization fees for five years.

• Capital Gains Tax: If your tax company sells fixed assets (like land or vehicles) to upgrade its technology, any profit from that sale is exempt from capital gains tax, provided the proceeds are used to buy new productive assets.

• Customs Duties: A flat 2% customs rate is applied to all imported machinery and equipment needed for your project, regardless of the standard tariff.

Digital Transformation and Compliance

In 2026, tax compliance for Egyptian SMEs is no longer about paper folders; it is about real-time data integration. The egyptian tax authority has made digital adoption a prerequisite for accessing the financial incentives of Law 152. If your system is not "talking" to the ETA, you are effectively invisible to the incentive regime.

Mandatory Adoption of the Egypt e-Invoice System for SME Incentives

The e-invoicing system is now the sole gateway for B2B transactions.

• The Requirement: Every invoice must be issued in XML or JSON format and signed with a digital e-seal.

• The Penalty: Invoices not validated by the ETA portal are legally void. This means you cannot deduct them as expenses, and your customers cannot use them to claim VAT input credits.

• The Benefit: Real-time validation eliminates the need for aggressive year-end audits, as the tax authority already has a record of every transaction.

Transitioning to e-Receipt Egypt: B2C Requirements for Small Retailers

If your business sells directly to the public whether a cafe in New Cairo or a retail shop in Alexandria you must now use the e-receipt system.

The Reality Check: By 2026, the phased rollout has covered almost all districts. Unlike e-invoices, e-receipts require your Point of Sale (POS) system to be permanently connected to the ETA's central platform. Every "print" command on your register triggers a digital log with a unique UUID.

The Whitelist Program: Accessing Immediate VAT Refunds for Compliant SMEs

One of the most valuable incentives for SMEs in 2026 is the "Whitelist" (or Green Track) status.

• How it works: Businesses that consistently hit tax compliance targets filing on time and using e-invoicing without errors are added to a priority list.

• The Advantage: While a standard VAT refund can take 45 days, Whitelisted SMEs can receive up to 65% of their refund within 15 days of application.

• The Logic: The ETA trusts your digital trail, so they release funds first and verify later.

Advanced Regulatory Compliance: What are the TP Guidelines in Egypt?

As an SME scales, its inter-company dealings come under the spotlight of the egypt tax authority. Transfer Pricing (TP) ensures that transactions between related parties (like a parent company and its subsidiary) are conducted at "Arm’s Length" meaning prices should mirror what would be charged to an independent third party. In 2026, the goal of these regulations is to prevent profit shifting while exempting smaller players from heavy paperwork.

Navigating the 2026 Transfer Pricing Threshold: The EGP 30 Million Exemption

The most significant update for 2026 is the doubling of the materiality threshold.

• The Rule: According to the latest ministerial decrees, only companies with annual related-party transactions exceeding EGP 30 million are required to prepare full TP documentation.

• The Benefit: If your inter-company transactions (loans, service fees, or product sales) stay below this EGP 30 million mark, you are exempt from the "Master File" and "Local File" requirements.

• The Reality Check: While exempt from documentation, you must still disclose these transactions in "Table 508" of your annual corporate tax return. Being exempt from a report does not mean being exempt from transparency.

Master File and Local File Requirements for Scaling SMEs

If you exceed the EGP 30 million threshold, the tax compliance burden shifts into a three-tiered reporting structure:

1. The Local File: A detailed report focusing specifically on the Egyptian entity’s transactions, including a "benchmarking study" to prove your prices are fair. This must be submitted within two months of filing your tax return.

2. The Master File: A high-level overview of the global group’s business operations and TP policies.

3. Country-by-Country Reporting (CbCR): Typically only required for large groups with consolidated revenues exceeding EGP 3 billion.

Related-Party Transactions: Disclosure vs. Full Documentation Requirements

Many business owners confuse "Disclosure" with "Documentation."

The "Common Scenario" Technique: Imagine your main company in Cairo rents a warehouse from a separate "Real Estate" company you also own.

• Disclosure: You must list this rent in your tax return regardless of the amount. Failure to do so carries a penalty of 1% of the transaction value.

• Documentation: You only need the 100-page report (Local File) if that rent plus other related transactions exceeds EGP 30 million. Failure here is more costly, with a 3% penalty for missing files.

Financial Reporting and Audits: The 2026 Procedural Simplification

In 2026, the egyptian tax authority has significantly reduced the administrative "red tape" for smaller players. The goal is to move from a policing model to a partnership model, where compliance is rewarded with freedom from constant oversight. For most SMEs, this means you can finally stop acting like a full-time accountant and start acting like a business owner.

Record-Keeping Exemptions: Simplified Accounting vs. Law 91 Requirements

Under the standard income tax law (Law 91), businesses are required to maintain exhaustive double-entry books, audited financial statements, and detailed expense receipts for every piastre spent.

• The SME Advantage: Law 152 and the recent 2025 reforms allow SMEs to use "Simplified Accounting." You are largely exempt from submitting full financial books when filing your corporate tax return.

• The Requirement: Instead of complex ledgers, you only need to maintain a simple record of your daily revenues. As long as your digital trail (e-invoices and e-receipts) matches your declared turnover, the ETA accepts your filing at face value.

• The Bridge: For companies scaling toward the medium-tier, integrating the Odoo accounting module ensures that these simplified records are generated automatically, keeping you ready for any future transition without extra labor.

The 5-Year Audit Guarantee: Building Trust with the Egyptian Tax Authority

Perhaps the most impactful 2026 incentive is the "Audit Holiday."

Pattern Recognition: Most tax compliance anxiety stems from the fear of a surprise inspection. To solve this, the 2025 legislative package (specifically Law 6) introduces a five-year guarantee.

• The Rule: Eligible SMEs that integrate with the electronic systems will not face tax assessment inspections or audits for a period of five years from the date they register for these benefits.

• The Logic: By the time the five-year window closes, the ETA will have five years of verified digital data from your e-invoices, making a physical audit almost redundant.

Dispute Resolution: Settling Outstanding Claims Under Law No. 7 of 2025

If you have "legacy" issues from before the 2020 reforms, Law No. 7 of 2025 offers a final exit ramp. It targets the "interest trap" where late fees eventually exceed the original tax owed.

Expanding Your Business: Moving Beyond the SME Tax Regime

Success shouldn't be punished. One of the biggest fears for small owners is that a "good year" will push them over the turnover threshold, suddenly triggering the full 22.5% corporate tax rate.

The 20% Growth Buffer: Handling Turnover Increases Without Losing Benefits

To prevent a "growth cliff," the 2026 regulations include a safety buffer.

• The Buffer: If your revenue exceeds the EGP 20 million (or EGP 200 million for medium firms) limit, you can retain your SME status and your 1.5% flat rate for one additional year, provided the increase is no more than 20% above the threshold.

• The Limit: This buffer can only be used once every five years. It is designed to give you the breathing room to transition your internal systems.

Preparing for Standard Corporate Tax: The Shift to Profit-Based Filing

When you finally outgrow the SME regime, your tax assessment shifts from revenue-based to profit-based. This requires a higher level of tax compliance and more robust HR and payroll management to ensure all employee costs are properly deducted from your taxable income.

The transition is smoother if you have already adopted a professional Odoo ERP system. By the time you hit the standard corporate tax bracket, your backend is already producing the "Law 91 compliant" financial statements you’ll need to justify your deductions and lower your effective tax rate.

Next Step: Perform a "Turnover Check." Calculate your total sales from January to now. If you are trending toward the EGP 10M or 20M mark, you need to verify your MSMEDA classification today.