Egypt’s 2025 VAT Amendments: Practical Insights for the Construction and Contracting Industry

Egypt’s taxation landscape is witnessing one of its most comprehensive transformations in recent years.

Following the introduction of Law No. 157 of 2025 and Ministerial Decree No. 418 of 2025, the treatment of Value Added Tax (VAT) for construction and contracting activities has undergone a fundamental reform, designed to enhance transparency, compliance, and digital integration across the sector.

These changes represent a strategic step in Egypt’s ongoing journey toward a modern, data-driven, and fully digital tax administration, aligning national tax policy with global VAT best practices.

Key Reform Highlights under the 2025 VAT Amendments

1. Integration of Construction Activities into the Standard VAT System

For the first time, construction and contracting services are no longer subject to the limited Schedule Tax of 5%, but are now taxed under the standard VAT rate of 14%.

This shift enables businesses to deduct input VAT on goods, equipment, and subcontracted services, a significant advancement that supports better cash flow management and encourages accurate tax reporting through Egypt’s e-invoicing system.

2. Transitional Treatment for Existing Contracts

For contracts initiated before 18 July 2025, where a certified work order, electronic invoice, or e-receipt was already issued, VAT will be applied to 36% of the total invoice value at 14%, effectively maintaining the 5% burden that was previously applicable.

• Input VAT deduction is not permitted for these transitional contracts.

• If the main contractor has already remitted VAT, subcontractors are exempt from re-submission, provided a certificate confirms the payment.

This rule ensures fairness, prevents double taxation, and supports operational continuity for projects that were underway prior to the legal amendments.

3. Full VAT Application for New and Renewed Contracts

All contracts signed, renewed, or expanded after 18 July 2025 are considered new contracts, and therefore fully subject to the 14% standard VAT rate with input VAT deductibility granted.

The reform also clarifies that long-term and continuous services, including construction, installation, infrastructure, and energy projects, fall under the same VAT treatment, ensuring consistency in reporting and compliance through Egypt’s national e-invoicing platform.

4. Official VAT Implementation Guide for Construction Activities

The Egyptian Tax Authority has issued a comprehensive VAT Implementation Guide to help contractors, subcontractors, and consultants correctly apply the new VAT framework.

The guide includes:

• Step-by-step procedures for issuing and reporting electronic invoices and receipts.

• Detailed tax calculation examples and case-based clarifications.

• A section on government-related contracts, requiring 20% of VAT due to be remitted directly to the Authority.

This publication aims to unify interpretation, simplify compliance requirements, and promote proactive tax awareness among businesses in the construction and contracting sector.

5. Complementary Policy Decisions – October 2025 Updates

In parallel with the law, new ministerial decisions issued in October 2025 introduced additional measures to streamline tax policy and investment processes:

• 15% VAT on imported alcoholic beverages, effective January 2026.

• Suspension of VAT on imported production lines until final assembly or customs clearance.

• Clarification of long-term advance payments, which remain non-taxable until recognized as actual revenue.

These updates demonstrate Egypt’s commitment to balancing industrial growth incentives with robust tax administration standards.

Professional Insight from Kozman & Co. | SBC Global 

From a professional tax advisory perspective, these VAT amendments deliver a clear, practical, and fair approach to compliance in the construction and contracting industries.

The move toward digital documentation, e-invoicing, and input VAT recovery marks a significant modernization of Egypt’s tax ecosystem, reducing ambiguity, strengthening accountability, and aligning with the international shift toward transparent fiscal governance.

At Kozman & Co. | SBC Global we view these reforms as an opportunity for businesses to strengthen internal controls, improve financial visibility, and leverage technology to achieve seamless tax compliance.