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Egypt - Indirect Tax Guide

Egypt - Indirect Tax Guide

Explore the requirements and rules that apply to indirect taxes in Egypt.

Explore the requirements and rules that apply to indirect taxes in Egypt.

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General

Types of indirect taxes (VAT/GST)

VAT.

What is standard VAT/GST rate?

14 percent. However, the goods and services listed in the second schedule attached to the Value Added Tax Law No 67 of 2016 are liable to schedule tax (at specific rates) in addition to the standard rate of 14 percent.

Are there any reduced rates, zero rates or exemptions?

Yes.

Reduced Rates

The machinery and equipment used in the production of a commodity or rendering of a service are subject to VAT at 5 percent except for buses and passengers cars.

Certain commodities and services listed in the First Schedule attached to the Value Added Tax Law No 67 of 2016 are liable to schedule tax ranging from 0.5-10 percent and other specific rates.

Zero Rates

Exported commodities and services are subject to VAT at 0 percent.

What are the general and specific place of supply rules, if applicable?

The place of supply of the local service or commodity is the supplier’s/service provider’s local place.

VAT/GST registration

Who is required to register for VAT/GST?

Any natural person or corporate body that sells goods or renders services subject to VAT whose gross sales of taxable and exempted goods and services equals or exceeds 500,000 Egyptian pound (EGP) within the 12 months before the date of the enactment of the Value Added Tax Law No 67 of 2016, or at any fiscal year or part thereof after the enforcement of the Value Added Tax Law No 67 of 2016. The Value Added Tax Law No 67 of 2016 came into effect 8 September 2016.

Is voluntary VAT/GST registration possible for an overseas company?

Yes. The voluntary VAT registration is allowed for those who are not obliged to register by the law and have not reached the registration threshold which is EGP500,000.

Does an overseas company need to appoint a fiscal representative?

An overseas company is not obliged to register for the VAT if its activities are limited to the exporting of commodities or services to Egypt and it does not appoint an agent or a representative in the case of exporting services to Egypt.

Is VAT/GST grouping* possible?

No. VAT grouping is not allowed. Each entity should register for VAT separately.

VAT/GST compliance

How frequently are VAT/GST and other indirect tax returns submitted?

The VAT returns are submitted monthly. The VAT tax returns shall be filed within 2 months following the end of the tax period. However, the VAT returns for the month of April must be submitted not later than the 15th of June. Please note that VAT returns shall also be filed even if there were no sales of goods or services during a tax period.

Can returns be filed and payments be made electronically?

Yes. Starting from January 2019, each registered, natural person or corporate body, under the Value Added Tax Law No 67 of 2016 shall be obliged to submit to the tax inspectorate in which they are electronically registered, a monthly electronic VAT declaration of the due tax and the due schedule tax, or one of them as the case may be, via the electronic portal of the Egyptian Tax Authority**.

VAT exceeding EGP100,000 must be paid by any means of electronic payment through the Electronic Payment and Collection System. However the amounts that are less than EGP100,000 may be paid by checks, while those exceeding EGP5,000 are prohibited from being paid in cash.

By 1 May 2019, VAT in more than EGP5,000 shall be paid by any means of electronic payment through the Electronic Payment and Collection System while VAT less than EGP5,000 may be paid by any means of payment, whether electronic or otherwise.

** The Registered is the responsible with the Egyptian Tax Authority according to the provisions of the Value Added Tax Law No 67 of 2016.

The Responsible is the physical or juridical person, private or public, obligated to collect VAT and deliver it to the Egyptian Tax Authority, whether they are a producer, trader or provider of a taxable service whose sales have reached the registration limit prescribed by the Value Added Tax Law No 67 of 2016, as well as every importer, exporter or distribution agent of a taxable commodity or service whatever the volume of their transactions is, and every producer or provider or importer of a commodity or a service set forth in the schedule attached to the Value Added Tax Law No 67 of 2016 whatever the volume of their transactions is.

What are the exchange rate rules?

The accepted exchange rate by the tax authority is the one announced by the Central Bank of Egypt.

VAT/GST recovery

Can an overseas company recover VAT/GST and other indirect taxes if not registered for VAT/GST locally?

No.

Is it a prerequisite that output tax be charged before input tax can be claimed?

No.

Are there any exemptions with the right to recover or deduct input VAT?

Yes. You cannot deduct the VAT incurred on the following as input tax:

  • the table tax imposed on commodities or services which themselves are subject to tax or are included as inputs in taxable commodities or services, where no special text is provided for in this law
  • the input tax comprised within the cost
  • the exempted commodities and services.

For what period of time may input tax not previously claimed be claimed (i.e. prescription)?

The Value Added Tax Law No 67 of 2016 does not prescribe a time limit for claiming input VAT. So it is permissible as long as it is related to the same fiscal year.

Where a VAT return reflects a refund due to the taxpayer, is the refund paid to the taxpayer or is the taxpayer required to utilize the refund as a credit against future payments?

The taxpayer is required to utilize the refund as a credit against future payments. However, where the credit balance is retained for more than 6 consecutive tax periods (months), the registered person shall apply in writing, showing the amount of credit balance. Supporting documents shall be attached to the application. The Egyptian Tax Authority (ETA) should check the correctness of the balance and refund within 45 days from the date of submitting the application.

Invoices

Is a business required to issue tax invoices?

Yes. A registered taxpayer is required to issue a tax invoice in duplicate upon the sale of the commodity or rendering the services subject to VAT. The invoice must include the buyer’s name and registration number of the registered person. The original should be handed over to the buyer, and the copy is to be kept by the registered person.

Is it possible/mandatory to issue invoices electronically?

It is possible to issue invoices electronically but not mandatory.

Is it possible to issue recipient-created tax invoices?

No.

Audits

Do tax audits take place on a regular basis?

Yes.

Are audits done electronically in your country/territory (e-audit)? If so, what system is in use?

No.

What penalties can arise from non-compliance?

An additional payment is due for each month or part of the month starting from the tax payment deadline until the date of payment. The additional payment is 1.5 percent of the unpaid VAT and the table tax amount, including the tax resulting from amendments to the tax return.

Sanctions for breaching the procedures set out in the VAT law include:

  • a penalty between EGP500 and EGP5,000 in addition to the payment of the VAT, table tax and additional tax
  • penalties are doubled if the offense is repeated within 3 years
  • tax evasion sanctions
  • prison terms from 3-5 years
  • penalty payment from EGP5,000 to EGP50,000.

Special indirect tax rules

Are there unique country/territory-specific indirect tax rules that differ from 'standard' indirect tax rules in other jurisdictions?

None.

Does a reverse charge mechanism apply?

Yes. Where a non-resident person who is not registered with the Egyptian Tax Authority fails to assign a representative or an agent to handle the VAT registration, remittance of VAT, surcharge and other due taxes, the beneficiary of the service would be required to calculate the VAT and remit it to the tax authority within 30 days from the date of selling such service.

Can VAT on reverse charges be claimed as input tax, to the extent that the expense on which the reverse charge VAT is accounted for, is used for taxable purposes?

Yes.

Can non-residents appoint local agents in order to avoid reverse charge VAT by virtue of charging standard rate VAT and accounting for such VAT through the agent?

Yes. Non-resident and non-registered companies are ordinarily required to appoint a representative or an agent in Egypt to be responsible for carrying out all the obligations as stipulated by virtue of the VAT Law which includes registration, remittance of the tax, surcharge and other due taxes.

Are there indirect tax incentives available (e.g. reduced tax, tax holidays)?

Yes:

  • The reduced tax rates stated earlier in this report
  • 56 exempted commodities and services
  • Companies formed under free zone are exempted from VAT.

Rulings

Is it possible to apply for formal or informal advance rulings from the tax authority?

Yes.

Are rulings and decisions issued by the tax authorities publically available?

No.

Other indirect taxes

Are there other indirect taxes not commented on above?

No.

For further information please contact:

Ahmed Salah
Director, Indirect Tax
KPMG in Egypt
T: +20 1 009111223
E: asalah@kpmg.com

Footnote

*By ‘grouping’ we mean: either a consolidation mechanism between taxpayers belonging to the same group (payment and refund are compensated but taxpayers remain distinct) or a fiscal unity for VAT/GST purposes (several taxpayers are regarded as a single taxpayer).

Disclaimer

All information contained in this document is summarized by KPMG in Egypt, a member firm affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

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