KPMG in Egypt provides an overview of significant changes to Egypt’s tax laws, including: introduction of a new VAT law, which replaces the current sales tax law and new rules for the settlement of tax disputes.
The government of Egypt has released the VAT Law on 7 September 2016 and enacted it the next day on 8 September 2016. The law imposes VAT on all commodities and services, including the local or imported commodities and services listed in the table attached to the tax law.
A 3-month transitional period applies without imposing additional tax, provided any tax differences are relatively connected to preparing for the tax.
All commodities and services would be subject to VAT, with the ability to offset VAT previously paid on inputs of such commodities and services so that the final consumer ultimately bears the tax.
Companies with annual turnover of 500,000 Egyptian pounds (EGP) or more are required to register for VAT purposes. Others may register voluntarily. A registrant that meets the threshold required for registration will maintain its registration number under the previous general sales tax.
A producer or importer of any commodity listed in the table attached to the VAT Law will remain registered, regardless of its transaction volume, as will importers of taxable commodities.
The VAT applies at the rates of:
Special VAT rates and specific amounts on commodities and services are listed in the schedule attached to the VAT Law.
The additional tax/surcharge of 0.5% percent per week under previous law is reduced under the new VAT law to 1.5 percent per month.
Under the VAT Law, the statute of limitation is 5 years, or 6 years in cases of tax evasion.
Tax would be refunded within 45 days under the VAT Law (rather than 3 months under the previous law), provided that the supporting documents are available. In all cases, a certificate to this effect must be issued by an Egyptian certified public accountant registered with the Ministry of Finance’s Register of Chartered Accounts and Auditors.
VAT returns are due 2 months following the end of each month except for April, where the tax return is required to be filed by 15 June.
The VAT due on sales of commodities and services is reduced by VAT paid on inputs or calculated for sales returns. VAT deductions are allowed for:
The deduction is limited to the tax due. Any remaining balance is carried forward to subsequent periods until the deduction is completely used/covered.
Where a non-registered non-resident individual or company renders a service to an Egyptian resident recipient, the recipient is required to calculate the tax and remit it to the tax authority within 30 days following the date of buying the service.
Where a registrant imports a service required for carrying out its taxable activity, then it would be regarded as the importer and supplier for the service at the same time.
The Egyptian parliament issued a new law1 for the settlement of tax disputes between taxpayers and the Egyptian Tax Authority, with the goal of reducing the number of outstanding tax disputes. Highlights of the new law are as follows.
1 Law No. 79 for the year 2016 on the Settlement of Tax Disputes, which was published in the Official Gazette on 26 September 2016 and came into force as of the date following its publication.