Tax Cuts And Tariff Exemptions To Be Introduced In Egypt

by Lorys Charalambous, Tax-News.com, Cyprus

05 December 2008

The Egyptian economy looks set to gain from a package of tax reductions designed to stimulate growth.

The move, which was announced by Finance Minster Youssef Boutros-Ghali on December 1, is being made by the government to try and boost businesses and investment throughout the country in light of the recent downward trend in economic activity.

The package, which is set for introduction in January of next year, will feature sales tax exemptions on capital goods for investors, as well as a series of tariff reductions on a range of goods, and is expected to cost the government around EGP2.2bn (USD400,000).

Infrastructure will also benefit from the stimulus package, with cash injections being ploughed into the country's rural areas. On top of this, Egypt's Investment Minister, Mahmoud Mohieldin, has also announced that the government intends to reinstate the free zone status of refineries after removing their tax incentives earlier this year.

Once reintroduced, refining firms will be able to claim back their energy-related tax benefits, which the government anticipates will secure up to EGP10bn (USD180,000) worth of extra tax revenue by kick-starting the investments in this sector which were lost when the tax breaks were stopped.

Despite proposed tax cuts, economic growth is projected to fall next year, and is already down by 2% this year compared to last year's 7.2% growth.

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