Egypt

Scope of VAT

Tax shall be imposed on all commodities and services, whether local or imported, at all stages of trading.

A commodity is any material object, whatever its nature and source. The customs tariff code is used to define the commodity.

A service is any supply other than a commodity.

VAT rates

The general VAT rate was 13% for the period from the enactment of the law in September 2016 to June 2017, and was raised to 14% thereafter.

In case of export transactions, VAT shall be imposed at the rate of 0% provided the supporting documentation is availed.

A reduced rate of 5% is applied on the sale of machines and equipment upon fulfilling certain criteria and conditions.

Inbound and outbound products from the free zone companies shall be subject to 0% under the oversight of the GAFI (General Authority for Free Zones and Investment) as long as the supply is related to the operations of a free zone company within the free zone.

VAT registration

Compulsory registration

Any natural or legal person who has attained the registration threshold shall be required to file a registration request within 30 days after reaching the threshold.

There is no threshold for importers of commodities or services, exporters, or distribution agents.

The taxable person shall notify the Egyptian Tax Authority (ETA) of any change in their tax registration information within a period of 30 days of such change. Otherwise, a penalty ranging from EGP 20,000 and not exceeding EGP100,000 may be imposed.

Voluntary registration

Group or branch registration

Non-residents

According to the newly introduced simplified vendor registration system, every non-resident and unregistered person who does not practise  an activity through a permanent establishment in Egypt and sells goods or provides taxable services to a person who is not registered inside the country is obliged to apply for registration under the simplified vendor registration system specified by the executive regulations.

The simplified vendor registration system should be enforced within six months for services and within two years for commodities from the effective date of the law.

Deregistration

The Tax authority shall automatically deregister the registered person in case that person no longer satisfies the mandatory registration requirements.

In case the voluntarily registered person may request for deregistration following 24 months from the registration. Or in case the registered person ceases to carry on the activity.

Input tax deduction

Input tax allowed

All registrants that provide a taxable output, meaning sales of commodities and/or services, are eligible to recover all of the incurred input tax in relation to such sale transactions.

This would be applicable as well in case of exporting commodities or services, and sale to exempted parties.

Input tax expressly denied

Input VAT recovery is not allowed in the case of:

• sale subject to schedule tax

• exempted products and/or services

• input VAT that was booked as a cost element

• input VAT in cases of the Simplified Registration System.

Partial exemption

Pre-registration or post-deregistration VAT 

Output tax

Brief description of output VAT

Exempt supplies

There is a list of 57 items that are exempt from VAT at all stages of trade.

The exempt supplies include, but not limited to:

• tea, sugar and coffee

• crude oil

• natural gas and butane gas

• banking operations

• education, training and scientific research services

• health care services.

In addition, the law grants some exemptions to certain parties and activities, upon fulfilling certain criteria for each (e.g. diplomats, the military, oil and gas upstream business).

New items added in the introduced law no. 3 include sanitation services, non-touristic marine transportation services for individuals, air transportation for individuals, vaccines, blood and its derivatives and family planning products. Moreover, medicine and the relevant production materials shall be exempt based on a decree to be issued from the Egyptian drug authority. Freight services related to imported beans, grains, food salt and manufactured spices are now exempt from VAT. While medically equipped cars for individuals with special needs are no longer exempt, without prejudice to the provisions of the law of the rights of persons with special needs no. 10 of 2018.

The introduced law has exempted freight services related to importing beans, salt and manufactured spices.

Services provided by the Suez Canal authority for transiting ships, including the transit fees, are now exempt in addition to disregarding the uncollected tax for the period prior to the issuance of this law.

Machinery and equipment imported or purchased from the local market for industrial purposes, for a period of one year from the date of their custom release or purchase from the local market, should be exempted from VAT if it has been proven to the ETA that such machinery and equipment were used in the industrial production within one year (and this period may be extended by a maximum of additional one year). In case of selling these machines, they shall be subject to the general VAT rate at 14% and the seller should notify the ETA before selling.

Zero-rated supplies

The commodities/products and services provided to a non-resident entity shall be seen as an export transaction subject to zero rate upon fulfilling certain conditions.

Sale transactions to free zones and economic zones with special natural entities shall be deemed as exports subject to zero rate on the condition of having approval from the free zone authority.

Special rated supplies

International trade

International trade imports

Goods

Goods shall be considered as imported when transferred to the Egyptian territories and entered into the local territories under the oversight of the customs authority which is responsible for applying the import VAT.

Services

Services shall be considered as imported where they are provided by a non-resident entity to a recipient in Egypt.

Resident and registered entities are no longer required to calculate and declare the tax due on imported services if the non-resident service provider is registered at the ETA under the simplified vendor registration system.

Exports

Goods

A sale from a local Egyptian company to a non-resident entity shall be seen as export sales with the condition that the transaction is supported by the relevant customs documentation. (i.e. export forms no. 13).

Services

Providing a service in Egypt to a non-resident service recipient shall be seen as an export service under the condition of fulfilling the criteria listed under the executive regulation.

If the place of utilising the service is abroad, the VAT at the rate of 0% will be applied under the exported service conditions. However, if the place of utilising the service is in Egypt, even indirectly, it will be considered as a local service and will be subject to the standard VAT rate or schedule tax depending on the nature of the services.

Place, time and value of supply

Place of supply

Time of supply

Output tax is due once a tax point has been triggered on the earliest of the following dates:

• date of issue of an invoice for the supply

• date of full or partial payment for the supply

• date when the goods or services are supplied to the purchaser.

In the case of a provision of services of a continuous nature such as telecommunications, and construction works, the time of supply shall be the date of issuing the invoice.

Value of supply

The taxable value for purposes of VAT assessment shall be the actual paid-up value, or the amount payable for the supply.

For related party transactions, the value shall be the market value at arm’s length.

The taxable value shall comprise the amounts collected from the buyer or the service recipient and all incidental expenses such as the cost of commission, wrapping, transportation, insurance, etc.

The value shall be reported as a basis for VAT assessment and private usage shall be determined on the basis of the total cost. The value for commodities or services for personal consumption shall be determined according to the market forces and transaction circumstances (i.e. normal sales value).

The taxable value of the instalment shall include the instalment sale interest, if exceeding the credit and discount rate announced by the Central Bank of Egypt on the sale date.

The value of the imported commodities shall include the applicable customs duties and any other services related to the imported commodities.

The value for the sale of used products shall be 30% of the sale value of the products.

VAT compliance

Accounting basis and tax period

The registrant must have regular accounting books and records, which could also be in the form of an electronic accounting system.

The taxable person must have electronic accounts that clarify the annual revenues and costs. Such electronic accounts will be managed by the decree that will be issued by the Minister of Finance on the transformation from the paperwork accounting system to the electronic accounting system.

A penalty ranging from EGP 20,000 and not exceeding EGP 100,000 in case of the failure in being compliant in having electronic accounts as mentioned above. 

The Minister of Finance may introduce some simplified rules for having accounting books and records for specific categories of taxable persons who will be specified by his decision.

The tax period is represented as one calendar month, while the financial year follows the financial year for each of the registrants.

Returns and payment of VAT

The VAT return covers a period of one month and should be filed on the ETA online portal within one month after the end of the month. 

The tax shall be payable on the date of submission of the return. 

Any delay in paying the due VAT shall be subject to an additional tax calculated based on 1.5% of the due tax per month (or part of a month).

In addition to the delay fine, the law imposes a penalty on certain acts that are in violation of the law. These are to be not less than EGP3,000, and not more than EGP50,000. These violations include delay of the return filing, declaring inaccurate information in the return and failure to submit a return through the tax authority’s online gateway. 

Failure to submit a VAT return for a period of more than 60 days from the time limits allowed for submission of such return is followed by imposition of a penalty of not less than EGP50,000 and not more than EGP2,000,000. 

Tax evasion attracts penalties ranging from EGP5,000 and not exceeding EGP50,000 and/or imprisonment of between three and five years.

The following are examples of tax evasion acts:

• failing to register for vat within the legally due dates

• failure to declare taxable revenues

• incorrect input tax deduction

• failure to issue a tax invoice.

Objections and appeals

In the case of receiving an unfavourable tax claim, the registrant has 30 days from the date of notification to lodge an appeal. The first stage is to present the case to an internal committee to study the appeal request within a time frame of 60 days.

If a settlement is not reached, the case is transferred to the appeal committee within the following 30 days.

The appeal committee opinion shall be considered as a final decision and, in case it is not favourable to the registrant, the case may be escalated to the courts.

Time limits

Withholding VAT obligation

Appointment of withholding VAT agents

Withholding VAT exemption

Withholding compliance

Refunds

The registrant is eligible for a refund of VAT paid in the following cases:

• the input VAT paid on the materials and services that are exported whether in original form or as part of other products

• the input VAT was erroneously calculated

• the input VAT balance has been carried forward for more than 6 continuous periods

• input VAT paid on machines and equipment used in production or service provision except for cars and buses (unless their usage is the licensed activity of the company)

• the input tax incurred by a non-resident person registered via the simplified registration system for the purposes of carrying out their activity within the country

In December 2019 changes to regulations gave registrants the possibility of obtaining a refund of up to 65% of the VAT credit balance amount against a letter of guarantee from a bank until the formal refund procedures are finalised — which should take a maximum period of 6 months.

VAT record-keeping

Tax invoices

According to Decree no. 188, issued by the ministry of finance in 2020, registrants are obliged to issue an electronic tax invoice for each sale transaction, including the e-signature and the certified unified code of the goods  or services provided. 

In regards to the application of the aforementioned decree, the ETA does not accept the recovery of any costs or expenses, and does not accept paper invoices received from suppliers for VAT deduction/refund purposes except those supported by an electronic invoice starting from July 2023.

The tax invoice should include specific information set out by regulation as follows:

• sequential number and date

• seller name, address, and registration number

• purchaser name, address, and registration number or ID number

• the item description and value

• the VAT rate and amount in a separate line

The minister of finance may introduce some simplified systems — on a case-by-case basis — to calculate the VAT for those who could not issue regular tax invoices per transaction. POSs can use such simplified systems, which can be linked directly with the ETA for live reporting of tax.

Credit notes and debit notes

The registrants have the right to issue credit notes and debit notes to reflect adjustments in sale transactions or any corrective actions that have a VAT impact with considerations on the conditions and rules specified in the executive regulations for every different situation.

Additional export documentation

For each export transaction, the seller should maintain the appropriate supporting documentation.

For the exportation of products, the seller should maintain an archive of the export sales documents i.e. Form no. 13 that is issued for each export.

Record-keeping

Every registrant must archive records and documentation for five years following the tax period in which the registrant submitted the return.

A penalty not exceeding EGP50,000 will be imposed in case of failure to comply with the archiving time frame mentioned above for paper and electronic records. In cases where the registrant is subject to an evasion case, the ETA has the right to extend this period to six years.

Specific VAT rules

Bad debts

The debts due to the ETA from the registrant may be written off in any of the following cases:

• in case of a final ruling for adjudging a bankruptcy and if the bankruptcy case is closed

• if the registrant leaves the country for a ten-year period without leaving funds

• if it is proved that the registrant has no money to seize

• if the registrant dies without leaving legacy.

Digital economy

The ETA established an e-commerce unit in Egypt to regulate the digital economy inside the country.

Electronic goods

Any individual or juridical person practising the activity of selling goods (subject to general rate only or combining general rate and exempted goods together) through websites or social media platforms to independent sellers, and have attained the registration threshold, shall be required to register with the VAT tax authorities.

However, if their revenues are related to commissions, exported goods or goods subject to schedule tax, then they are obligated to register for VAT once they start their businesses.

Electronic services

This means services provided through the Internet or any social media platforms, freelance services and e-learning.  

Freelancers usually practise professional services that are subject to 10% schedule tax, which makes it necessary for them to register for VAT once they start their businesses. However, if the freelance activities, for example, are related to design or selling mobile and computer software that are subject to 14% general rate and have attained the registration threshold, they are required to register with the VAT tax authorities.

E-learning services are exempted from VAT, unless the service providers do not work under educational institutions, therefore they shall be treated as freelancers providing professional services subject to 10% and obliged to register for VAT once they start their businesses.

In light of the Egyptian government’s continual efforts in the digitalisation journey, the ETA has implemented a simplified VAT registration and compliance framework for non resident vendors and electronic distribution platforms (EDPs) selling remote services to consumers in Egypt. Accordingly, the ETA issued the VAT guidelines for remote services provided by non residents by MOF decree no. 160 for 2023.

The guidelines are addressed to non resident service providers and digital product vendors.

• All non-resident service providers and digital products vendors are required to register according to the guidelines within three months from the date of the ministerial decree (22 March 2023).

• If sales exceed EGP 500k annually, the service providers should register under the new simplified vendor registration system.

• Non resident service providers and EDPs shall register for VAT online, without having to establish a physical presence in Egypt.

Land and buildings

Leasing

Promotional gifts

Secondhand goods

The sale of used products is subject to special treatment where the taxable value is only 30% of the sales value.

In order to apply such special treatment, the following conditions have to be met, otherwise the normal application of VAT on the full sales value should be applied:

• the product has to be originally purchased as a new item by the current seller

• it has to be used for at least two years

• it has to be directly sold by the registrant.

Tourism industry

Currency conversion

Transfer of business

Warranty repairs

Other indirect taxes

Import duties

The new Customs Law no. 207 of 2020 was recently enacted.

The Minister of Finance issued Ministerial Decree no. 38 of 2021 to apply a new pre-clearance or Advance Cargo Information (ACI) system that requires importers to submit e-customs declarations for shipments before their arrival.

Excise duties

Under the Egyptian VAT Law no. 67 of 2016, an excise tax was introduced as a special tax rate imposed on certain products and services.

The excise tax (which is also called schedule tax or table tax) should be imposed only once on the listed products and services (e.g. professional services, construction services, processed potatoes). The excise tax is solely applied on specific listed items while it could be applicable in addition to the normal 14% VAT on some other items (e.g. air conditioners).

The excise tax should not be considered as a recoverable input tax, nor should it be deducted against incurred input tax, with very limited exceptions.

Stamp duty

There are two distinct types of stamp tax, which are imposed on legal documents, deeds, banking transactions, company formation, insurance premiums, and other transactions:

• The  nominal stamp tax is imposed on documents, regardless of their value. The tax rate for items such as contracts is EGP0.9 for each paper.

• Percentage or proportionate stamp tax is levied based on the value of transactions.

Advertising services are no longer subject to stamp tax duty at 20% after the issuance of law no.3 of 2022. However, such services are now subject to a general VAT rate at 14%.