Turning the Tax System on Its Head: Assessing Syria’s New Fiscal Reform

 

In addition to the general allowance, taxpayers may deduct specific expenses: SYP 6 million (about USD 520) for a non-working spouse, SYP 8 million (about USD 695) per dependent child, and documented costs for healthcare, education, housing rent, and loan interest.

For businesses, the corporate income tax is unified at two flat rates: 10% for priority sectors such as industry, healthcare, education, consulting, technology, training, and aviation, and 15% for all other sectors. Agricultural income remains exempt, in line with long-standing practice. Dividends distributed by resident companies, along with certain categories of foreign investor income, are also exempt. Capital gains are generally taxed at 10%, though real estate transactions remain subject to the separate Real Estate Sales Law.

The law abolishes the discretionary “lump-sum” tax committees that long determined small business liabilities, replacing them with self-declared returns filed either through simplified income statements or full balance sheets depending on firm size. It also consolidates or eliminates many  wartime fees—among them the Martyr’s Stamp, War Effort Stamp, and the Reconstruction Levy—which had proliferated since 2011 and fueled perceptions of arbitrary extraction. 

On the administrative side, the reform proposes a leap into digitization: e-filing, electronic invoicing, QR-coded receipts, and enhanced compliance units equipped with digital tools. It also establishes specialized tax courts for disputes. While the draft requires the tax authority to justify claims of undeclared income, the burden remains on taxpayers to substantiate their accounts—an arrangement that, if applied fairly, could provide stronger protections than in the past.

 

Comparison of Current and Proposed 2026 Tax Systems

 

Aspect	Previous System	Proposed New System (2026)
Personal Income Tax (PIT)	5%–15% Progressive monthly bands (5% up to SYP 250k, rising to 15% above SYP 1.1m) Minimum exempt = monthly minimum wage	Exemption = SYP 60m/year (USD 5.2k) Wages taxed at 6% on first SYP 5m taxable income, 8% above Additional deductions for dependents, health, education, housing
Corporate Income Tax (CIT)	10%–35% Progressive for individuals (10–25%) 15–20% for most companies 25% for banks/insurance 35% for oil & gas Surtaxes apply	10% for priority sectors (industry, health, education, tech, training, aviation) 15% for others Some capital gains taxed at 10% No surtaxes
Small Businesses	Business under SYP 3m/year net income exempt Above that, rates:  10% up to 10m SYP 14% up to 30m 18% up to 100m 22% up to 500m 25% above 500m	Businesses under SYP 60m/year net income exempt Above that, standard CIT apply
Agriculture	Exempted, but with various indirect and hidden taxes (animal head tax, sales of agricultural products)	Fully exempt (0%) Potential indirect taxes unclear
Capital & Investment Income	Interest taxed at 10% Dividends exempt	Dividends from resident companies exempt Foreign investor income exempt Some capital gains taxed at 10%
Fees & Surcharges	Multiple overlapping levies (reconstruction, Martyr’s Stamp, etc.)	Consolidated into a unified structure Wartime levies abolished
Adminis- tration	Paper-based, weak enforcement, corruption Taxpayer bore burden in disputes	E-filing, QR-coded invoices, electronic records, specialized tax courts Tax authority must justify adjustments when alleging undeclared income

Multiple online references and documents, including a draft tax law reviewed by Karam Shaar Advisory Ltd.

Risks and Limits

The advantages of this model are clear. First, the reform offers immediate relief to households by removing almost all wage earners from the tax base. Given that the vast majority of Syrians live in poverty, exempting low- and middle-income earners from direct taxation addresses both economic hardship and political realities. 

Second, by lowering corporate rates to some of the lowest in the region—10 to 15% compared with Lebanon’s 17%, Jordan’s 20%, and Türkiye’s 25%—the reform is explicitly designed to attract capital. Exemptions on dividends and certain categories of foreign investor income might be aiming to lure back diaspora funds and encourage reinvestment in the formal economy. 

 

 

Third, the simplification and digitization of administration aim to replace the opaque committees and discretionary enforcement of the old system with transparent, rule-based procedures. This offers the prospect of rebuilding public trust in fiscal institutions after years in which taxation was perceived as arbitrary, corrupt, and disconnected from public services. By scrapping multiple overlapping fees and streamlining compliance, the reform also reduces the administrative burden on businesses, which may help encourage formalization and improve the investment climate. 

Taken together, these measures are intended to signal that Syria is open for business and serious about fostering private sector-led recovery.

Yet the risks are equally significant. The most obvious is fiscal sustainability. With such a high exemption threshold and such low rates, the PIT will contribute negligible revenue, leaving the government almost entirely reliant on corporate income tax from a small number of formal firms. Syria’s tax-to-GDP ratio—already among the lowest in the world at under 5% in 2024—is likely to fall further under this model. By contrast, tax collection is much higher in non-oil MENA countries such as  Tunisia (34%), Jordan (17%), and Egypt (14%), while Türkiye collects around 23% and the Organization for Economic Co-operation and Development (OECD) average is 34%. The World Bank has argued that 15% of GDP is a tipping point, with countries that reach this percentage tending to see meaningful improvements in inclusive growth.

Even if investment does materialize, a flat 15% on profits will not generate revenues anywhere near the scale required to finance reconstruction costs. The reform assumes that low rates will spur growth and eventually broaden the base, but, at least in the short term, the state risks stark underfunding. 

VAT-Like Sales Tax

To try to make up for the limited revenue potential of the new income tax framework, on 23 September 2025 the Ministry of Finance circulated a draft Sales Tax Law that resembles a value-added tax (VAT). The proposal introduces a general rate of 5 percent on most goods and services, with “special taxes” of up to 15 percent on selected luxury items and high-end services. Specific goods are subject to higher sales tax rates, such as pork products and derivatives (45%) and alcoholic beverages (84%). The sales tax will effectively replace the previous consumption tax (Legislative Decree 11 of 2015), which had imposed a fragmented set of excise-style levies on a limited list of goods and services. 

The introduction of a VAT-like tax is a positive development in the context of post-conflict recovery. Evidence from fragile states such as Liberia, Malawi, Nepal, and the Solomon Islands shows that introducing or strengthening VAT and customs/excise taxes was central to sustained revenue gains. However, in Syria’s case, the sales tax is not exactly VAT, as it is levied primarily at the final point of sale rather than at each stage of production.  

 

Overall, however, Syria’s redesigned tax system raises further concerns. The exemption threshold of SYP 60 million per year (about USD 5,200) for the income tax appears arbitrary and detached from the country’s actual income distribution, with no clarity on whether or when it will be reviewed. Likewise, the decision to privilege certain priority sectors with a 10% corporate rate while taxing others at 15% is not clearly justified. The criteria appear ad hoc, with little sign of a coherent strategy linking tax policy to national development goals, and uncertainty surrounds the drafting process. It is unclear whether the Ministry of Finance drew on international technical assistance or incorporated lessons from other post-conflict tax reforms, leaving doubts about the reform’s grounding in best practice.

Administrative challenges loom just as large. If the system comes into force in January 2026, officials will have only a few weeks to adapt. Tax staff may lack the training to handle a shift toward self-declaration and digital oversight, creating risks of uneven enforcement and bureaucratic bottlenecks. 

At the same time, while digital tools such as e-filing, QR-coded invoices, and electronic invoicing are promising, they presuppose infrastructure that Syria still lacks: electricity supply is unreliable, internet connectivity is scarce, and online penetration remains low (see our interview with the Minister of Telecommunications and Information Technology in the August issue). On the compliance side, households and firms may struggle with an entirely new system, particularly given low levels of financial literacy, entrenched informality, and pervasive mistrust of the authorities. 

Given these risks, pressing ahead with the income tax law in its current form would be premature. Instead, the government should open the process to broader consultation, engaging international organizations for technical guidance, the international community for financial and policy support, and—most importantly—Syrians themselves to ensure the system reflects societal and economic preferences. Only through such inclusive dialogue can a tax reform deliver both legitimacy and lasting fiscal sustainability. 

The Ministry of Finance did hold a three-week consultation on the income tax law in July 2025, and this appears to have had some impact. The initial proposal set the exemption threshold at USD 12,000 per year, while the latest draft lowered it to SYP 60 million (about USD 5,200)—an adjustment that might reflect the feedback received. Yet the law remains far from meeting Syria’s fiscal and developmental needs, highlighting the shortcomings of a consultation process that was too brief, too narrow, and too limited to deliver meaningful reform. 

Similarly, the Ministry of Finance opened a three-week email-based consultation on both the income tax and sales tax drafts.