Aimed at improving transparency, reducing compliance burdens, and integrating informal businesses into the formal economy. At the heart of this effort is Law No. 5 of 2025, a game-changing piece of legislation that incentivizes voluntary tax compliance through unparalleled tax reliefs and dispute resolution mechanisms. This strategic step is designed not just to enforce the law—but to rebuild trust and encourage participation.
Key Objectives of Law No. 5 of 2025
Issued on February 12, 2025, Law No. 5 serves as part of the first phase of Egypt’s New Tax Facilitation Initiative. Its core mission is to help non-compliant taxpayers reconcile their tax status starting February 13, 2025, without fear of retroactive penalties. The law specifically targets:
- Income Tax (Law No. 91 of 2005)
- Value-Added Tax (VAT) (Law No. 67 of 2016)
The legislation provides a limited-time opportunity for taxpayers to regularize their situation without facing fines, while also aiming to integrate the informal sector, lower tax evasion, and promote tax justice.
Top Highlights of the Law
1. Tax Amnesty with No Retrospective Penalties
Businesses and individuals not previously registered with the Egyptian Tax Authority (ETA) are granted a clean slate. Unless already under investigation, taxpayers will not be held accountable for previous years. The clock starts from the actual activity start date post-law enactment.
2. Three-Month Registration Window
Taxpayers must register within three months of the law’s enactment, and onboard all digital tax platforms—including:
- The e-Invoice System
- The e-Receipt System
- The Payroll Tax Platform
- VAT registration where applicable
The Minister of Finance may extend this period once.
3. No Penalties on Late Declarations (Since 2020)
Taxpayers who haven’t submitted tax returns from 2020 onwards can now do so without incurring penalties. Those who have submitted may revise any past errors or omissions within six months of the law’s implementation.
4. Simplified Tax Dispute Settlements
For assessments prior to January 1, 2020, taxpayers can:
- Settle disputes by paying 30% of the tax due based on their self-declared returns.
- If no return was submitted, pay the last agreed tax amount plus 40%.
Installments are allowed with no late fees:
- 25% in first 3 months
- Next 25% in following 3 months
- And so on, over four quarters
5. Full Waiver of Fines for Timely Payments
Where accounts are audited based on accurate records, 100% of fines and additional tax will be waived if the principal is paid within three months.
6. Clearance for Real Estate & Unlisted Securities Transfers
Individuals who sold real estate or unlisted shares in the past five years can settle taxes with full penalty exemption if completed within six months.
7. Protection from Retroactive Claims
The law protects taxpayers from investigations on transactions more than five years old, unless the Tax Authority had previously initiated formal action.
8. Digital-First Tax System
The reform promotes digital transformation through electronic submission of returns and dispute forms, streamlining processes and cutting down on bureaucracy and corruption.
9. Deadline Reminders for Compliance
To encourage serious compliance, the law sets non-negotiable deadlines:
| Deadline | Action |
|---|---|
| May 12, 2025 | Last day to submit disputes for periods before Jan 1, 2020 |
| June 30, 2025 | Deadline for settling disputes under Law No. 160 of 2024 |
| August 12, 2025 | Final date for real estate/securities tax declarations (last 5 years) |
| August 12, 2025 | Deadline for submitting or correcting tax returns for: |
| – Income Tax (2020–2023) | |
| – VAT (2020–2024) |
Analytical Perspective: Why This Law Matters
Law No. 5 of 2025 is more than legislative reform—it’s a paradigm shift in Egypt’s approach to taxation. Rather than relying solely on enforcement, the government is adopting a “compliance through encouragement” model. The law’s core philosophy is forgiveness in exchange for participation.
This modern tax approach is well-suited to the realities of:
- The digital economy
- E-commerce platforms
- The growing number of freelancers and self-employed workers
From a policy standpoint, it eases the legal backlog for the ETA and offers a cost-effective path for dispute resolution. For businesses, particularly SMEs and startups, it removes the fear of backdated liabilities—often the biggest barrier to formalization.
Challenges Ahead
While promising, the law’s success will depend on several critical factors:
1. Tax Awareness
Low awareness in Egypt’s informal sector could hinder uptake. An aggressive education campaign is essential.
2. Digital Literacy
Some taxpayers may struggle to navigate online systems. This highlights the need for training and support programs.
3. Monitoring and Fair Implementation
The ETA must ensure fair and transparent enforcement to avoid loopholes that could encourage tax evasion under the guise of compliance.
Conclusion: A Strategic Tax Reset for Egypt’s Future
Law No. 5 of 2025 is a landmark initiative in Egypt’s ongoing economic reform agenda. It rebuilds trust between citizens and the state, offers real incentives for compliance, and brings informal actors into the fold of sustainable economic growth.
If executed effectively, this law can create a resilient, equitable, and future-ready tax system—one that rewards honesty, supports innovation, and powers a thriving formal economy.
Ready to Take Action?
To apply for Egypt’s Tax Facilitation Initiative or submit your tax dispute resolution forms, visit the Egyptian Tax Authority’s official website today.
