Egypt’s House of Representatives granted final approval on Tuesday to a draft law amending the Value Added Tax (VAT) law, significantly reducing the tax on medical devices to 5% while subjecting natural gas to a new schedule tax.
During a plenary session chaired by Speaker Hesham Badawy, the parliament passed the legislation, which contains three primary articles alongside a publication clause. According to the parliamentary committee’s report, the amendments follow the economic reform plan initiated by the Ministry of Finance and the Egyptian Tax Authority via the first package of the tax facilitation initiative. The report stated that the changes aim to consolidate transparency and tax justice, enhance trust between the tax administration and the business community, and balance the state budget.
Article One of the draft law replaces the texts of Article 3 (first paragraph), Article 5 (fourth paragraph), Article 28 bis, and Article 30 (first paragraph, item 3) of the VAT law. It also replaces items 19, 20, 28, 32, 35, and 36 of the accompanying list of goods and services exempt from VAT.
These substitutions establish several new provisions. It applies an exceptional 5% VAT rate to medical devices, down from the standard 14%, matching the rate for machinery and equipment to support the health sector. The article also removes the tax burden on kidney dialysis machines and filters by fully exempting their inputs, parts, and necessary equipment from VAT.
To support transit trade and Egypt’s target of becoming a regional logistics centre, the law states that VAT is no longer due on services performed on transit goods, mirroring the existing exemption for the transit goods themselves.
The amendments increase the maximum suspension period for VAT payments on machinery and equipment, pending their installation and use in industrial production, to four years from two years. This identical treatment is now applied to medical devices used in industrial production, with the legislation specifying devices for manufacturing and producing prosthetics, medicines, medical solutions, and blood plasma.
Under Article One, the refund period for credit balances is reduced to four consecutive tax periods (four consecutive months) instead of six. It also grants an additional benefit to taxpayers in enterprises subject to Law No. 6 of 2025—which provides incentives for projects with an annual turnover not exceeding EGP 20m —allowing them to claim refunds after only three months.
To regulate the tax community, the leasing of administrative buildings and units will now be subject to the general VAT rate. Taxpayers can deduct this tax if practising a taxable activity, or include it as a deductible expense for income tax calculations if their activity does not allow for a tax deduction. Buildings used as headquarters for religious, charitable, social, educational, and health activities are exempted for social considerations.
The law also unifies the tax treatment of financial services by exempting them from VAT without discrimination, whether provided by the National Post Authority, banks, or companies supervised by the Central Bank of Egypt or the Financial Regulatory Authority.
To alleviate the burden on the state budget, natural gas was excluded from the VAT-exempt list. It will instead be subject to a schedule tax of EGP 20 per thousand cubic feet, in accordance with the second article of the attached project.
Article Two adds a new item, number 3, to the second paragraph of Article 22 of the VAT law. This grants taxpayers the right to a tax deduction on sales of locally produced machinery, equipment, and medical devices subject to Article 28 bis, aiming to stimulate domestic production by placing it on equal footing with fully exempt imported equivalents.
Article Three cancels serial numbers 8 and 10 from the first item of the VAT schedule, subjecting them to the standard 14% VAT rate. This grants the right of tax deduction to producers of household soap, industrial detergents, and gypsum, responding directly to the demands of companies operating in these industries.
Article Four stipulates that the law will be published in the Official Gazette and will take effect the day following its publication.
