MPs approve draft bills to raise tax exemption threshold, pension, and cost-of-living allowance

Cairo – October 16, 2023: Egypt’s Parliament gave their final approval to a package of draft bills on Sunday aimed at providing financial support to workers and retirees, including an amendment to the Income Tax Act and cost-of-living allowance.

MPs approved a bill pertaining to increasing the tax exemption threshold to LE 45,000, a 25 percent climb from the current LE 36,000. The amendment is part of a set of measures from the government to mitigate the effects of rising inflation on individuals with lower incomes.

In a report by the House of Representatives Planning and Budget Committee on the draft bill released last month, this would ease the tax burden on low-income citizens and is in line with the state's commitment to promoting social justice by distributing the tax burden in accordance with various income levels and adapting to economic and social changes and developments.

Over the past nine years, Egypt’s income tax exemption threshold has risen significantly, recording a 275 percent increase, while the minimum wage jumped by 233 percent in the same period, according to a report from the committee.

At this time, Egypt has two income tax exemptions. Regardless of income, all individuals pay no tax on the first LE 15,000 of their earnings, while individuals earning less than LE 600,000 annually benefit from a 0 percent tax band, with the current threshold set at LE 21,000. Combined, this means that individuals in the lowest income bracket are exempt from wage taxes on the initial LE 36,000 of their earnings.

With the new amendments, earnings exceeding LE 45,000 (inclusive of the LE 15,000 personal allowance) will be subject to specific tax rates based on income brackets.

Parliament members also approved a draft bill aimed at providing additional cost-of-living allowance and pension for citizens. The bill would double the exceptional cost-of-living allowance to LE 600 for all state employees starting October, as well as increasing the exceptional grant for pensions to LE 600.

The draft bills are now awaiting President Abdel Fattah El Sisi’s approval for formal ratification, with retroactive implementation set to commence from October 1.

Over the weekend, Finance Minister Mohamed Maait revealed that Egypt plans to increase the country’s tax-to-GDP ratio, stressing that the government is aiming to do so without imposing additional burdens on citizens.