New Law Aims to Encourage the Development of Micro, Small and Medium Enterprises & Includes Tax Incentives

Micro, Small and Medium Enterprises (MSMEs) have long been considered the helm of the Egyptian economy. MSMEs represent about 95% of the country’s industrial sector. However, their contribution to tax yields does not exceed 7%. To boost their contribution to the Egyptian economy, the Egyptian President ratified Law No. 152 of the year 2020 regarding the Development of Micro, Small and Medium Enterprises that includes a number of tax incentives to business owners. The new law introduces a flat simplified tax that targets the obstacles that may impede MSMEs and instead fosters their growth. The Minister of Finance Mohamed Maet stated that — as per the Law — the flat tax rate will be collected according to the volume of business and/or transactions of the company in question. He added that business owners will no longer be obliged to present books or tax invoices to the Tax Authority; provided business owners with turnover above EGP 500 thousand annually are maintaining regular bookkeeping.

Here is what you need to know about tax rates due under the new law:

• (1%) of the volume of work for projects whose business volume is 3 million EGP and less than 10 million EGP annually.
• (0.75%) of the volume of work for projects that have a business volume of 2 million EGP and less than three million EGP annually.
• (0.5%) of the volume of work for projects that have a business volume of 1 million EGP and less than 2 million EGP annually.

The new Law also introduced simplified taxes and flat rates for micro projects

The minister called on business owners and small investors to quickly register their businesses at the Micro, Small, and Medium Enterprise Development Authority to enjoy the state’s incentives and avoid fines on informal businesses. He also clarified that if businesses record losses or face a higher tax rate under the Micro, Small and Medium Enterprises Law against the one stipulated in the Income Tax rate, the business owner can claim the lesser rate as per the Income Tax Law. It is noteworthy that MSMEs are now exempt from the stamp tax, notary registration, and contracting fees to establish a new business.

In our opinion, the law comes to support, serve and benefit the eco-system for MSMEs considerably. It allows business owners to operate with ease, reduce hassle and re-establish the trust with the Tax Authorities. While the law does require maintaining regular bookkeeping records, in this instance, it is actually a great benefit for business owners to track their business performance and reflect on the impact of their decisions. Again, an important aspect for companies, and MSMEs in particular, to follow the path of Sustainable Profitable

In summation, the law works to reduce the old bureaucratic system that might harm investor interests. Past bureaucratic obstacles had been blocking the incentives and advantages offered, by the legislator in this law, to attract more investments.