Egypt's second tax reform package
What it means for Finnish groups with Egyptian operations
Egypt's Ministry of Finance published draft legislation for its second tax facilities package in early June 2026. The package is not yet law — parliamentary approval is expected before the summer recess in July 2026 — but the direction is clear and the measures are worth reviewing now.
Intra-group dividends: from 90% to full exemption
The most significant change for multinational groups is the proposed full corporate income tax exemption on intra-group dividends at the recipient level, up from the current 90%. Equally important: withholding tax would apply only once, regardless of how many times a dividend is distributed up the chain. For a Finnish parent company receiving profits from an Egyptian subsidiary, this removes a layer of friction that currently affects group cash repatriation.
Selling your Egyptian entity: lower capital gains tax
If a Finnish group is considering divesting its Egyptian shareholding, Package 2 offers some relief. For unlisted entities, acquisition costs will be inflation-adjusted, reducing the taxable base for capital gains tax purposes (currently 22.5%). The sale would also be exempt from stamp duty. For listed entities, a separate capital gains tax exemption may apply for Egyptian-resident taxpayers, with stamp duty applying at 0.05% for both buyer and seller.
Financing Egyptian operations from Finland: read the fine print
Package 2 reintroduces a withholding tax exemption on interest payments from Egyptian borrowers to non-resident lenders — potentially eliminating a 20% WHT cost. However, the conditions are restrictive: the loan must finance a national infrastructure project, have a minimum tenor of five years, and be between parties that are not related for Egyptian tax purposes. In practice, this means the exemption does not apply to a Finnish parent lending to its own Egyptian subsidiary.
For related-party financing, a separate measure relaxes the debt-to-equity limit from 3:1 to 4:1 — again limited to national infrastructure financing, but useful if your Egyptian subsidiary is involved in such projects.
Industrial investment: VAT suspension on machinery and equipment
Finnish companies investing in Egyptian manufacturing or industrial operations should note the proposed four-year VAT suspension on purchases of machinery and equipment for industrial use. This is a meaningful cash flow benefit at the investment stage. A full VAT exemption is under review by the Egyptian Tax Authority, which would make the relief permanent.
VAT refund procedures are also being simplified: excess input VAT can be reclaimed after 3–4 months rather than the current minimum of six, improving working capital management for ongoing operations.
Ongoing tax disputes
The mandate of Egypt's tax dispute settlement committees has been extended to 31 December 2026. If your group has unresolved tax or customs disputes in Egypt, the settlement window remains open.
In brief: Package 2 moves Egypt's tax framework in the right direction for foreign investors — particularly on dividend flows and industrial investment. The interest WHT exemption is narrower than it appears for standard intragroup financing. The measures are expected to pass before July 2026. Groups with Egyptian operations should monitor the legislative progress and assess the impact on existing structures ahead of enactment.
This article is for informational purposes only and does not constitute legal or tax advice. Nordvia Advisory works with a local Egyptian advisory partner on Egypt-specific matters.