Egypt lets factories suspend VAT on machinery until industrial use is proven

What changed in detail

Law No. 149 of 2026, amending the VAT Law issued by Law No. 67 of 2016, was published in Egypt’s Official Gazette, issue No. 30 bis (a), on 28 July 2026 and applies from the following day. It inserts a new Article 28 bis. It suspends the VAT otherwise due on machinery, equipment and medical devices imported from abroad or purchased on the local market by factories and production units for use in industrial production, for one year from the date of customs release or local purchase — extendable by the tax authority, for justified reasons, for further periods not exceeding three years in aggregate. Where the authority establishes that the items were used in industrial production within that period, they are exempted from the tax outright, and the producer may not dispose of them for any other purpose during the following five years without notifying the authority and paying the tax due. If the period lapses without the required use being shown, the tax and an additional tax become payable by the producer, running from the date of customs release or local purchase until payment.

What it means

This is a suspension that converts into a permanent exemption, not an upfront relief — the tax is not waived at import or purchase, it is held open against proof of industrial use, with the one-year clock (extendable to three) doing the enforcing. A producer that cannot show the required use inside that window owes the original tax plus an additional tax, backdated to the release or purchase date, so deferring cash flow through the suspension becomes materially more expensive if the intended use falls through. The five-year disposal restriction runs after exemption is confirmed, so the compliance obligation doesn’t end when the tax is written off — it changes shape, from proving use to proving the item hasn’t been diverted. This is a separate limb of Law No. 149 of 2026 from the 5% VAT rate cut on the same category of machinery (recorded here) and from the natural-gas specific tax and refund-window changes in the same Law — each is its own mechanism and its own record.