Natural Gas No Longer Exempt From VAT in New Tax Reform Package

Amendments to Egypt's Value Added Tax Law have been approved by the House of Representatives, introducing a series of measures aimed at supporting industry and healthcare while accelerating VAT refunds and broadening the tax base.

Passed on June 23rd, 2026, the changes reduce VAT on medical equipment to 5% from 14%, bringing it in line with the preferential rate already applied to industrial machinery.

The maximum period for suspending VAT on machinery and equipment imported for industrial production has also been extended from two years to four years. The same treatment will now apply to machinery used in the manufacture of pharmaceuticals, blood plasma products, prosthetic limbs and medical solutions.

Under the amendments, the refund period for excess VAT credits has been shortened from six months to four months. Small enterprises with annual turnover below EGP 20 million will become eligible for refunds after three months under Law No. 6 of 2025.

Kidney dialysis machines, kidney filters and their components have been exempted from VAT, while domestic manufacturers will be allowed to deduct VAT on locally produced machinery, equipment and medical devices, placing them on equal footing with imported products.

To support logistics activity, services provided to transit goods moving between Egyptian ports will no longer be subject to VAT.

The amendments also bring the leasing of commercial buildings and administrative units into the VAT system at the standard 14% rate. Parliament stated that VAT-registered entities will be able to deduct the tax, while non-registered entities may treat it as a deductible expense for income tax purposes. Buildings used for religious, charitable, educational, healthcare and social purposes will remain exempt.

Financial services provided by Egypt Post, banks, companies regulated by the Central Bank of Egypt and firms supervised by the Financial Regulatory Authority will continue to be exempt from VAT.

Meanwhile, natural gas has been removed from the VAT exemption list and will instead be subject to a schedule tax of EGP 20 per 1,000 cubic feet. Soap, household detergents and gypsum will also become subject to the standard 14% VAT, allowing manufacturers in those sectors to claim input tax deductions.