Key Amendments to Egypt's VAT Law: New Taxes on Cigarettes, Media Services, and Crude Oil
Taarek Refaat
The Egyptian government has submitted a draft law proposing significant amendments to the Value Added Tax (VAT), aiming to enhance state revenues and promote fiscal and social justice.
A central element of the proposal is a 12% annual increase in the minimum and maximum retail prices of cigarettes for three consecutive years, starting November 2025. This increase may be adjusted downward depending on production costs.
Additionally, the draft law introduces a new taxation system on alcoholic beverages, shifting from a percentage-based tax to a fixed-rate system with progressive tax rates tied to alcohol content, increasing annually by 15% over three years.
The draft law also expands VAT coverage by subjecting news agencies and certain advertising services to tax, eliminating their previous exemptions, to further develop state resources. Another notable change is the imposition of a 10% VAT on crude oil, removing the prior tax exemption to boost public revenues.
Details on Cigarettes Pricing and Taxation
The amendments revise the VAT schedule to allow for an increase in the fixed tax category and the price limits on locally produced cigarettes that currently sell for up to EGP 38.88, raising the maximum retail price to EGP 48.
Cigarettes priced between EGP 38.88 and EGP 56.44 will see their price range adjusted to between EGP 48 and EGP 69. Similarly, locally produced or imported cigarettes priced above EGP 56.44 will have a maximum price set at EGP 69.
The annual 12% increase on these price limits will commence on November 5, 2025, continuing for three years.
The government reserves the right to adjust this annual increase based on the actual production cost, as assessed and proposed by the Minister of Finance and approved by the Cabinet.
Changes to Alcohol Taxation
The draft law replaces the percentage-based VAT on alcoholic drinks with a fixed tax system that imposes higher rates depending on alcohol concentration. This move aligns with World Health Organization standards and aims to protect public health. The tax rates will increase by 15% annually for three years, starting one year after the law's enactment, then reduce to a 12% annual increase.
Expanded VAT Coverage and Other Adjustments
The proposal also includes:
Subjecting commercial trademarks, similar to those of retail stores, to VAT to ensure tax equity.
Taxing certain media services and advertising agencies that were previously exempt.
Subjecting crude oil to a 10% VAT, removing the exemption previously granted to this commodity.
Excluding contracting and construction activities from the fixed VAT schedule and applying the general VAT rate instead, enabling input tax deductions and reducing costs for businesses.
These amendments reflect the government's commitment to enhancing financial resources, ensuring fairness in the tax system, and supporting Egypt's fiscal stability through targeted reforms.
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