In anticipation from all concerned parties, the Egyptian Minister of Finance announced the issuance of the Executive Regulations of the Value-Added Tax law no. 67/2016 by the beginning of February 2017 after reviewing its draft by the People’s Assembly (the Egyptian Parliament) and approving it. The VAT law no. 67/2016 was issued early in September 2016 to repeal and replace the General Sales Tax law no. 11/1991 and was in force from the day following its publishing in the official gazette.
The general VAT rate has been set at 13% for the fiscal year ending 30th of June 2017 and from 1st of July 2017, it will be increased to 14%. Machinery and equipment used in producing taxable or non-taxable goods or rendering services are subject to a 5% VAT rate whereas exported goods and services are zero-rated. However, special rates apply to a number of goods and services listed in Table (1) of the VAT Law.
According to the VAT law, all local and imported goods and services are subject to VAT except those specifically exempted. Services – as defined in the law - include any imported or local work done and not classified as goods. The VAT rates are applied subject to the classification of the services and goods under three main categories:
- Goods and services subject to the Schedule Tax and VAT
- Goods and services subject to Schedule Tax only
- Goods and services exempted from VAT
The VAT registration is obligatory to all persons or legal entities selling goods or services with gross sales of both taxable and exempted goods and services equal or higher than EGP 500,000 in the 12 months preceding the date of the VAT law enforcement. The person or legal entity is obligated to register with the Egyptian Tax Authority (ETA) within 30 days from the date of the legislated law.
Any person or legal entity, meeting or exceeding this threshold after the introduction of the VAT law is obligated to register within 30 days from the date of reaching the VAT registration threshold.
Businesses originally registered under the General Sales Tax law will be automatically considered registered for VAT, provided that their annual turnover reaches or exceeds the new registration threshold (EGP 500,000).
Non-resident and non-registered persons supplying taxable goods or rendering taxable services in Egypt to non-registrants who do not perform an activity through a Permanent Establishment (PE) in Egypt, shall appoint a fiscal representative responsible for all requirements listed in the new law. If such non-resident and non-registered persons deal with resident persons in Egypt, the resident person must ensure that a fiscal representative has been assigned, otherwise the resident will be liable to pay the tax due.
The VAT and Schedule Tax return should be submitted on a monthly basis. The deadline for submitting the return has not changed and is still set at two months from the end of each tax period, except for the April return that should be submitted by 15th of June.
The VAT law has determined the applicable late payment penalties as an additional payment to be due for each month or part of a month starting from the tax payment deadline and until the date of actual payment. The additional payment is calculated as 1.5% of the unpaid VAT and the variable table tax amount including the tax resulting from amending the tax return.
On the other hand, the sanctions for breaching the law provisions represented in procedures set out in the law include:
- Penalties ranging between EGP500 and EGP5000
- Payment of the VAT, Table tax and additional tax
- Penalties to be doubled if the breach is repeated within three years
At Eurofast, we are keen to provide our clients with all regulatory updates and to work closely with them to ensure full compliance for their businesses with the rapid changes of the legislation. Our seamless VAT registration, compliance & advisory services are accurately tailored to satisfy the business needs of our clients and fully mitigate the risks of being non-compliant. Eurofast’s team of professionals always works to define the core business needs and values of the clients and thinks beyond their expectations.
Our VAT array of services includes:
- VAT registration and compliance requirements
- VAT recovery risks and opportunities
- VAT return preparation
- VAT advisory services