Construction & Contracting Activities Treatment following the VAT Law Amendments

Following issuance of Law No. 157 of 2025 which introduced amendments to Egyptian Value Added Tax (VAT) Law, Decree No. 418 for the year 2025 was issued 23 October 2025.

Law No. 157 of 2025 initially introduced an amendment whereby Building and Construction activities (i.e., supply and installation contracts) are subject to standard VAT rate instead of Schedule Tax of 5%.

The new law identifies the practical approach to be followed for the implementation of such amendments, its impact on contractual agreements, the tax obligations for both general contractors and subcontractors, and tax deduction rules to apply. 

Key Highlights

Existing Contracts

Applicable Treatment

For existing contracts of construction and building works that are still being executed, and for which a certified work order or an electronic invoice, or electronic receipt has been issued before the implementation of Law No. 157 of 2025 (i.e., 18 July 2025), the base value for calculating VAT for these contracts will be 36% of the total invoice value issued based on the certified work order (i.e., 36% * the invoice value * 14%).

Provisions of Input VAT deductibility as stipulated by Egypt VAT Law shall not apply, whereby such existing contracts are not allowed to deduct input VAT from VAT remitted on such contracts.

Reporting Obligation

In case the main contractor has remitted VAT due for the contract, subcontractors shall be considered exempted from remitting such tax provided that a certificate is issued by the main contractor confirming such remittance.

New Contracts

Definition Scope

A contract renewal or an increase in the volume of works beyond the percentage stated in the original contract will be considered a new contract.

Provisions of Input VAT deductibility as stipulated by Egypt VAT Law shall apply, whereby the new contracts are allowed to deduct input VAT from VAT remitted on such contracts at the newly introduced rate of 14%.

Reporting Obligation

The main contractor or subcontractor, as applicable, is responsible for remitting the value-added tax (VAT) at the legally prescribed rate of 14% of the total invoice value issued based on the verified work order.

Notice

This alert has been written in general terms and does not constitute any form of advice or recommendation by Deloitte and, therefore, cannot be relied on to cover specific situations; application of the principles set out will depend upon the particular circumstances involved and we highly recommend that you obtain professional advice before acting or refraining from acting on any of the contents of this publication. Deloitte accepts no duty of care or liability for any loss occasioned to any person acting or refraining from action due to any material in this publication.

Deloitte Middle East would be happy to help readers understand how to apply the principles set out in this publication to their specific circumstances. 

Contacts

Our Tax experts listed below would be happy to discuss the above matters in more detail or support you through a further discussion on your specific requirements.