NEW OFFSET RULES IN EGYPT Based on Instruction No. 46 of 2025 Immediate impact on liquidity & cash flow

A new mechanism issued by the Egyptian Tax Authority (Instruction No. 46 of 2025) now enables taxpayers to offset their credit balances directly against outstanding tax liabilities, without entering the refund cycle, this change follows an advisory opinion from the State Council affirming taxpayers’ right to apply VAT credit balances against debit balances and provides a practical framework for implementation.

What Has Changed?

Taxpayers may now submit a request to apply credit balances against existing payables.

The process is clearly defined and time-bound:

• 20 working days for cases previously audited

• Up to 2 months for non-audited cases, including completion of the audit and the subsequent offsetting

The request is filed through a standard form including:

• The credit balance amount

• Relevant financial periods

• The liabilities to be offset

• Once submitted, ETA reviews the request and issues a written decision.

• Conditions to Apply the Offset

To proceed with the settlement, the following conditions must be met:

• Credit balances must be final and undisputed, evidenced by Form No. (15 – Audit)

• Debit balances must represent payable tax dues to the ETA

• If the credit exceeds the payable amount, settlement applies only up to the due tax, and the taxpayer may request a refund for the remaining balance

• ETA examines the date of realizing the VAT credit, ensuring no additional tax or delay fines apply, as long as the credit was valid and sufficient when the tax liability arose

Why Does This Matters for Businesses?

Many organizations maintain credit balances (often from VAT) while continuing to settle other tax liabilities in cash. This update delivers immediate benefits:

• Liquidity is improved

• Cash remains available for operations and investment

• No delays from refund procedures

• Reduced financial pressure

• Greater predictability for planning

This procedure is already being implemented, with companies receiving decisions within the defined timelines.

Who Can Benefit?

Any business holding credit balances may benefit, including:

• Manufacturing & industrial companies

• Exporters & importers

• Service providers

• Construction & contracting

• Digital & technology businesses

• Multinationals operating in Egypt

The mechanism applies across tax types, subject to ETA review and approval.

How Kozman & Co. | SBC Global Supports Clients?

KOZMAN & Co. supports clients through the complete cycle:

• Assessing available credit balances

• Preparing and submitting offset requests

• Following up with the Egyptian Tax Authority

• Ensuring accuracy and compliance

• Reviewing supporting documents where required

Our role is to help businesses use their credit efficiently and maintain strong cash flow.

KOZMAN & Co. Services:

• Audit & Assurance

• Tax

• Business Consultancy

• Corporate Affairs

• Business Support

We work with clients of all sizes, across multiple sectors, combining local expertise with international standards.

Ready to Apply This Procedure?

If your company holds credit balances while paying other taxes in cash, this update can improve liquidity immediately.

Our Tax experts would be happy to discuss the above matters in more detail or support you through a further discussion on your specific requirements.