Leaving the simplified tax regime is the part of Law 6/2025 that few businesses plan for. The regime taxes turnover of up to EGP 20 million at 0.4% to 1.5%, with quarterly VAT returns and no inspection for five years. Growth, a missed e-receipt obligation or the end of the five years can take you out of it, and the first year back on normal tax works very differently. This guide covers when you leave and what changes, as of October 2026.
If you have not joined yet and want the rates, bands and exclusions, start with our guide to the simplified regime in numbers.
Leaving the simplified tax regime: when does it happen?
There are three routes out of Law 6/2025.
| Route | What triggers it | Source |
|---|---|---|
| Turnover above EGP 20 million | Turnover passes the ceiling by more than 20%, or passes it a second time | Law 6/2025 Art. 10 |
| Exclusion | Returns not filed on time, or e-invoices and e-receipts not issued | Law 6/2025 Art. 3; ETA, 7 March 2026 |
| Exit after the lock-in | You file to leave once five years have passed | Law 6/2025 Art. 5; Form 1/11 |
The EGP 20 million ceiling and the one-time 20% margin
The regime is for businesses with annual turnover of EGP 20 million or less. Law 6/2025 gives one cushion. If, within five years of joining, turnover passes EGP 20 million by no more than 20%, so up to EGP 24 million, the business stays in and is taxed at 1.5% for that year. The cushion works only once.
If turnover goes above EGP 24 million, or passes EGP 20 million a second time, the business leaves the regime from the following year. A busy hotel season or one large contract can be enough, so a business near the ceiling should track turnover every quarter, not only at year-end.
Turnover is measured from your returns, your last final assessment, or e-invoice and e-receipt data. The figure the ETA sees is the figure on your e-systems, so they need to be right.
Exclusion: e-receipts and late returns
Two conditions apply throughout your time in the regime: file the required returns on time, and join the ETA e-systems and actually issue e-invoices or e-receipts. On 7 March 2026 the ETA warned that non-compliance with the e-systems leads to exclusion. In Sharm El Sheikh this matters more than elsewhere, because ETA Decision 484/2022 already obliges every business selling to consumers to issue e-receipts.
Leaving after five years: Form 1/11
You cannot leave the regime voluntarily before five years from the day after you applied. Once the five years have passed, the exit is filed on Form 1/11 under Ministry of Finance Decision 420/2025. The regime itself has no end date, so staying is also an option if you still qualify. Whether to stay or leave is a comparison of turnover tax against profit tax for your own margins.
What changes when you return to normal tax
The day you leave, the general rules apply again, including monthly VAT returns if you are registered. The main differences:
| Inside Law 6/2025 | After leaving | |
|---|---|---|
| Income tax | 0.4% to 1.5% of turnover | Tax on profit: 22.5% for companies; progressive rates for individuals |
| VAT returns (if registered) | Quarterly | Monthly, by the end of the following month |
| Payroll | Annual settlement only | Quarterly Form 4 plus the January settlement |
| Withholding and advance payments | Not applicable | Apply again |
| Stamp tax, dividend tax, capital gains on fixed assets | Exempt | Normal rules |
| Records | Simplified records (Decision 420/2025) | Full books to support a profit figure |
For a VAT-registered employer, the number of VAT and payroll returns rises from five a year to seventeen: twelve VAT returns instead of four, and four payroll returns plus the settlement instead of the settlement alone.
Prepare the books before you leave
Profit tax needs a profit figure, and that comes from books, not from a turnover total. The simplified records under Decision 420/2025 (sales and purchases journals, a tax-summary book, fixed-asset and inventory registers) are a minimum. From tax period 2028, Law 151/2026 requires every business to keep regular books in any case. If you build full books while you are still in the regime, the first year outside starts with opening balances you can defend. Our bookkeeping service does exactly this for small businesses in Sharm.
Get advice before your turnover decides for you
Our tax advisory service tracks your turnover against the ceiling, keeps your e-receipts and returns in order so that you are not excluded, and plans the move back to normal tax when the time comes. Book a free consultation and bring last year's figures.
