Egypt’s House of Representatives has approved significant amendments to the Value Added Tax (VAT) law, lowering taxes on medical devices to 5% and introducing a new schedule tax for natural gas. The legislation, passed during a plenary session chaired by Speaker Hesham Badawy, aims to bolster domestic manufacturing and streamline tax administration as part of the government’s ongoing economic reform program.
Why is the VAT rate on medical devices changing?
The Egyptian government is reducing the VAT on medical devices from the standard 14% to an exceptional 5% to support the national healthcare sector. According to the Egyptian House of Representatives, this move aligns the tax treatment of medical equipment with that of industrial machinery. By lowering these costs, the state intends to make essential medical technology more accessible and encourage the local production of prosthetics, medicines, and blood plasma solutions. Additionally, the new law fully exempts kidney dialysis machines and their necessary components from VAT, removing financial barriers for critical patient care.
How does the new law affect natural gas and industrial goods?
Natural gas is no longer exempt from VAT under the updated legislation. Instead, it is now subject to a specific schedule tax of EGP 20 per thousand cubic feet. This change is intended to alleviate pressure on the state budget by formalizing the tax treatment of energy resources. Conversely, the law provides relief for other industrial sectors; producers of household soap, industrial detergents, and gypsum can now deduct taxes on their inputs. This follows the cancellation of specific serial numbers from the VAT schedule that previously prevented these manufacturers from claiming tax deductions, a move designed to address direct requests from the business community.
What are the changes to tax refund and leasing rules?
To improve liquidity for businesses, the law shortens the period for claiming credit balance refunds from six months to four consecutive tax periods. For smaller enterprises covered under Law No. 6 of 2025—which supports projects with an annual turnover of up to EGP 20 million—the refund window is reduced further to three months. Meanwhile, the leasing of administrative buildings is now subject to the general VAT rate, though exceptions remain. According to parliamentary reports, headquarters used for religious, charitable, social, educational, and health activities are exempt from this tax to protect social and public service interests.
Key takeaways for taxpayers
- Medical Support: VAT on medical devices is cut to 5%, with full exemptions for dialysis equipment.
- Energy Tax: Natural gas is now taxed at EGP 20 per thousand cubic feet.
- Refund Acceleration: Taxpayers can claim credit refunds faster, with a four-month standard window and a three-month window for small businesses.
- Transit Trade: Services performed on transit goods are now exempt from VAT to help Egypt function as a regional logistics hub.
- Industrial Production: The VAT suspension period for imported machinery intended for production is extended from two years to four years.
These amendments are part of the first package of the Ministry of Finance’s tax facilitation initiative. The law is set to take effect the day following its publication in the Official Gazette, marking a shift toward balancing state revenue needs with the goal of incentivizing domestic industrial and medical production.
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