Moreover, the VAT law provides a table of tax rates (table tax rates) that are applicable to certain goods and services (either instead of the general VAT rate or in addition to the general VAT rate):
• Goods and services subject to table tax rates only.
• Goods and services subject to table tax rates in addition to the VAT rate.
Effective use and enjoyment. To avoid instances of non-taxation or double taxation, jurisdictions can apply “use and enjoyment rules” that allow a service that is “used and enjoyed” in the jurisdiction to be taxed or prevent a service that is “used and enjoyed” outside the jurisdiction from being taxed. If a service is taxed in the jurisdiction under the “use and enjoyment” provisions, a non-established supplier of the service may be required to register for VAT in that jurisdiction where it has customers that are not taxable persons. See Section C. Who is liable for details of simplified registration of non-established service providers).
Transfer of a going concern (TOGC). A TOGC is the sale of a business or part of a business capable of separate operation, including the sale of the business’s assets. Normally, the sale of the assets of a VAT-registered or VAT-registrable business will be subject to VAT at the appropriate rate. However, a TOGC may be outside the scope of the tax, subject to the following conditions:
• There must be a case of liquidation or cessation of business to be out of the scope of VAT.
• The acquiring company must be a VAT registrant or register itself in conformity of the provisions of the VAT law.
Transactions between related parties. In Egypt, for a transaction between related parties, the value for VAT purposes is calculated at open market value. The commodity value taken as the basis for the tax assessment shall be its price according to the market forces and transaction circumstances.
C. Who is liable
A natural person or legal entity whose gross sales reach the registration threshold (EGP500,000) after the date of enforcement of the VAT law in any financial year or part of it, must register with the tax authority within 30 days from the date of exceeding the threshold. There is no registration threshold for businesses that are providing services subject to schedule tax, or for those involved in importing, exporting, or acting as a distribution agent.
Exemption from registration. Registration provisions shall not apply to the following categories:
1. Producers, importers, service providers or traders whose activities are limited to exempted goods and services.
2. Traders whose activity is limited to goods and services that are subject only to table tax.
3. Nontaxable natural persons who do not sell goods or provide services, even if their sales reached the registration threshold.
Voluntary registration and small businesses. Voluntary registration is allowed in Egypt if the total value of a natural or juridical person’s sales of goods and services that are subject to VAT has not reached the prescribed VAT registration threshold. A natural or juridical person may apply for registration with the competent tax authority using Form No. 1 – VAT, according to the following procedures and conditions:
• Its turnover in the 12 months prior to the submission of application should not be less than EGP150,000 and its paid-up capital should not be less than EGP50,000.
• It should have a permanent headquarters where it exercises the activity subject of registration.
• It should have a valid tax card.
• Should it be the case, a registered person may apply for deregistration only after the lapse of 24 months from the date of registration unless the registered person ceases the activity completely before that date and provides the tax authority with relevant evidence.
Group registration. Group VAT registration is allowed in Egypt exclusively for branches. After obtaining separate VAT registrations for each branch (once they meet the registration criteria), it
is allowable to register all branches under a single group. Upon group registration, all branches will be treated as one entity and will share the same tax number. Consequently, all members of a VAT group in Egypt are jointly liable for VAT debts and penalties. There is no minimum time period required for the duration of a VAT group.
Fixed establishment. A foreign business is deemed to have a fixed establishment for VAT purposes in Egypt under certain circumstances. Also referred to as “permanent establishment,” it is defined in the VAT and corporate tax law as premises through which the activity is practiced, including the following:
• The management headquarters
• The branch, office, factory or workshop
• The mine, oil field or gas well, quarry or any other place for extracting natural resources
• The building site, the construction or installation project
Non-established businesses. For supplies made by a nonresident to a resident nontaxable person (i.e., B2C supplies), the nonresident provider is required to register under the simplified registration system and account for VAT on such supplies as follows:
• Submission of the nonresident provider’s VAT return should be on a monthly basis starting from June 2023.
• Suppliers selling goods are provided a grace period of two years starting from January 2023. This applies to the provision of all taxable goods and services.
For supplies made by a nonresident to a resident taxable person (i.e., B2B supplies registered under the VAT law) and the service is necessary for the recipient’s activity, the VAT is required to be self-accounted for by the customer. See the subsection, Reverse charge, below. However, if the VAT-registered business is receiving a service not necessary to its business, the recipient, whether a registered business, a governmental authority, a public authority or any other entity, is obligated to calculate the tax due and remit it to the tax authority within 30 days from the date of sale, unless the nonresident service provider is registered under the simplified registration system.
Simplified registration. A non-established business (i.e., supplier of services) is required to register for VAT under the simplified registration system if it has customers who are not taxable persons but who are residents in Egypt (i.e., business-to-consumer (B2C) supplies).
Under the simplified registration system, non-established businesses selling taxable goods or rendering taxable services to residents in Egypt (B2C supplies), but who are not registered with the tax authority, are required to have a simplified registration for VAT compliance purposes. The simplified registration system is required for non-established businesses as follows:
• Service providers are obliged to register under the simplified registration system and submit their VAT returns monthly, starting from June 2023.
• Suppliers selling goods are provided a grace period of two years starting from January 2023.
This provision applies to all taxable goods and services.
For business-to-business (B2B) supplies, the registered entity that is the recipient of the service is the responsible party for the remittance of local VAT using the reverse charge mechanism (see the Reverse-charge subsection below).
Tax representatives. Tax representatives are no longer required in Egypt for VAT purposes.
Reverse charge. The VAT guidelines issued on 22 March 2023 to nonresidents and the Executive Regulation issued in January 2023 have widen the scope and detail for the reverse-charge methodology as below.
For B2B supplies, the Egyptian resident, VAT-registered taxpayer is obligated to self-account for VAT on supplies received as importer and supplier at the same time if the service is necessary for its business.
For B2C supplies, legal non-VAT-registered entities receiving or importing services from nonresidents are obligated to calculate the tax due on these services and remit it to the tax authority within 30 days from the date of rendering the service, unless the nonresident rendering the service is registered under the simplified registration system. A legal non-VAT-registered entity can fulfill its VAT obligations by registering for the reverse-charge mechanism system, which is specifically designed for this purpose.
Domestic reverse charge. There are no domestic reverse charges in Egypt.
Digital economy. Nonresident providers of electronically supplied services for B2C supplies are required to register and account for VAT in Egypt. This is done by registering under the simplified registration system, see the Non-established businesses subsection above.
Nonresident providers of electronically supplied services for B2B supplies are not required to register and account for VAT on supplies in Egypt. Instead, the customer is required to selfaccount for VAT due by way of the reverse-charge mechanism (see the Reverse-charge subsection above).
To correctly apply the reverse-charge mechanism, nonresident companies must verify the TRN and UIN of their B2B clients. ETA provides an API access, allowing vendors to obtain credentials and access the verification system.
Failure to validate TRN and UIN pairs will classify transactions as B2C, subjecting them to the applicable VAT rate and potential penalties for noncompliance.
VAT guidelines mention examples of services that could be considered as “electronically supplied services,” which include the following:
• Supplies of digital content, such as e-books, movies, TV shows, music and online newspaper subscriptions evidenced
• Website design or publishing services
• Online supplies of games, apps, software and software maintenance
• Legal, accounting or consultancy services
There are no other specific e-commerce rules for imported goods in Egypt.
Online marketplaces and platforms. The online marketplaces/platforms are subject to VAT, where the tax is due upon selling the commodity or rendering the service by the supplier or online marketplace (which will issue an invoice) at all stages of circulation thereof, regardless of the method of selling or rendering or circulation, including the electronic means.
Registration procedures. A local taxable person must fill in a hard copy registration form, attaching copies of the entity’s tax card, commercial register and import card. The originals should be provided for review upon request. The registration form may be submitted by the entity representative with a power of attorney. The documents required to be submitted with the VAT registration application are as follows:
• Tax card
• Commercial registration
• National ID or passport for foreigners
• Company’s premises rental agreement
• Article of association
• Power of attorney for the representative
The VAT registration application must be made in person at the ETA.
For a nonresident taxable person, it should create an account on the Egyptian tax authority’s website. The documents required to be submitted with a VAT registration application are as follows:
• Nationality (country of incorporation for a legal person)
Examples of goods and services subject to table tax
Special rates apply to several goods and services, as follows:
• Tobacco and tobacco products
• Petroleum products
• Food vegetable oils, fluid, solid, purified or refined or mixed – 5% (*)
• Animal and plants oils and fats for food, partially or entirely dehydrated, solid or purified anyway else, refined without any further processing – 5% (*)
• Crackers and flour products – 5% (*)
• Processed potatoes
• Fertilizers, agricultural pesticides
• Gypsum
• Contracting work and construction (supply and installation), except for those undertaken for the establishment, maintenance or restoration of places of worship – 5% (*)
• Soap industrial detergents for home use
• Air-conditioned means of transportation, such as buses and trains between the governorates
• Professional and consultancy services
• Electronic liquid
• Rental or sales value of commercial trademarks – 10% of the rental or sales value to be subject to 10%.
• Media and program production – 5% (*)
(*) Rates provided as an illustrative example.
Goods and services subject to the table rates and the VAT general rate (14%), with a right to deduct the input tax up to the application of VAT at the general rate:
• Soda water – 8%+14% (**)
• Nonalcoholic drinks – 8%+14% (**)
• Alcoholic drinks
• Beer (alcoholic and nonalcoholic)
• Aromatic preparations (skin or hair care) – 8%+14% (**)
• TVs larger than 32 inches, refrigerators larger than 16 feet
• Air conditioning and cooling devices and units and their independent units
• Golf carts and similar vehicles – 10%+14% (**)
• Passenger cars
• Communications services through cellular phone networks
(**) Rates provided as illustrative example.
The term “exempt” refers to supplies of goods and services that are not liable to VAT and that do not qualify for input tax deduction.
Examples of exempt supplies of goods and services
A table lists exempted goods and services (with no right to deduct input tax) including:
• Tea, sugar and coffee
• Banking services
• Medicines and active substances based on a decision issued by the Egyptian Medicines Authority
• Health care services
• Production, transfer, sale or distribution of electric current
• Education, training and research services
• Sale and rental of land and residential and nonresidential buildings
Option to tax for exempt supplies. The option to subject exempt supplies to tax is not available in Egypt.
(reduced rate), refer to Examples of goods and services taxable at 5%. However, some special rules apply for the recoverability of VAT incurred on capital goods, as follows:
• If the goods produced using the capital goods are subject to VAT at the general rate of 14%, the input tax can be deductible immediately upon issuing the first VAT return.
• If the goods produced using the capital goods are subject to table tax (the table rates attached to the VAT law), the taxable person cannot deduct the input tax.
• If the goods produced using the capital goods are exempted from VAT, no input tax deduction or refund is allowed.
Refunds. VAT refund is allowed for both resident and nonresident VAT registrants.
A refund of VAT is permitted for resident VAT registrants in the following situations:
• The tax previously collected or charged related to exported goods and services. This applies whether exported in its original state or included as a component in other goods and services. The refunded tax should not exceed the credit balance provided that the value of the exports will be paid to a bank under the supervision of the Central Bank of Egypt according to the rules it specifies or pursuant to any of the payment methods or other methods of settlements specified in the Executive Regulations, provided that the value of exports is not less than the inputs value thereof.
• Tax is collected by mistake.
• A credit balance results after more than six consecutive periods have lapsed.
• Tax previously paid on buses and passenger vehicles if used for such business activity licensed for the enterprise.
• The tax borne by a nonresident person registered under the simplified registration system for the purpose of conducting their activity in Egypt.
In all cases of applying for a refund, a certificate signed by a chartered accountant must be one of the documents signifying the right of the taxable person to deduct the tax or refund the same.
The ETA has amended the VAT refund process and clarified all steps to curb delays in applying for a VAT refund. The steps for applying for VAT refunds are as follows:
1) Submission of application and receipt of response to the application
2) Internal correspondence between the investigating tax departments and other relevant tax departments
3) Execution of local entries, documents and export certificates
4) Clarification for refunds in cash or by bank transfer
5) Clarification of the calculation of the production rate
6) Processing VAT refund applications
A refund of VAT is permitted for nonresident VAT registrants under the simplified vendor registration regime. Under this scheme, nonresident registrants can seek a refund of the input tax they have incurred in Egypt related to their taxable activities. The refund process involves submitting an application along with supporting documents.
Pre-registration costs. Input tax incurred on pre-registration costs in Egypt is only recoverable if it was incurred before the issuance of the VAT law in 2016. The guidance on this matter is based on the VAT law introduced in 2016, and no additional guidance has been released by the tax authorities since then.
Bad debts. Output tax accounted for on supplies that do not get paid by the recipient (i.e., bad debts) cannot be recovered in Egypt.
Noneconomic activities. Input tax incurred in relation to noneconomic activities is not recoverable in Egypt.
the issuance of the invoice. Foreign currency e-invoices are permitted for supplies made by nonresident entities. It is recommended to include the same information as given above for VAT e-invoices.
Supplies to nontaxable persons. There are no special invoicing rules for supplies to nontaxable persons. As such, full VAT e-invoices and e-receipts are required when dealing with non-registrants.
Records. A taxable person is required to maintain proper books and records to record its transactions. Examples of what records must be held for VAT purposes include e-invoices, accounting books and records, and any related documents to the transactions.
In Egypt, VAT books and records can be kept outside the country. However, this only applies for electronic archiving, as records can then be kept locally in Egypt or abroad. Hard copies of records must be kept locally in Egypt.
Record retention period. A taxable person must retain such records together with copies of the invoices for five years following the end of the fiscal year when the entries are made.
Electronic archiving. Electronic archiving is allowed in Egypt. Records can be kept and archived electronically.
I. VAT returns and payments
Periodic returns. VAT and table tax returns are generally submitted monthly. A monthly tax return for the VAT and table tax, or either one of them, should be filed within one month grace period, from the month end. Currently the VAT return and the table tax return are included in one VAT format, as all VAT registrants are entitled to submit such format monthly according to its business activity.
A VAT return should be filed even if no taxable sales of goods or services are achieved during the tax period. Non-submission of the VAT return within the due dates entitles the tax authority to make a deemed assessment. The tax authority will be liable to provide the basis of this deemed assessment.
Periodic payments. The payment should be filed within one month from the month end and be transferred to the tax authority’s bank account through authorized banks.
An article has been added to the executive regulation of the unified tax law outlining that where the settlement of a service fee or goods sold was done so in a foreign currency, the VAT due on such sold goods or services provided should be in the same foreign currency after deducting the related input tax from the collected output tax in the foreign currency.
Electronic filing. Electronic filing is mandatory in Egypt for all taxable persons. VAT returns must be filed electronically online (https://eservice.incometax.gov.eg or https://www.eta.gov.eg)
Payments on account. Payments on account are not required in Egypt.
Special schemes. No special schemes are available in Egypt.
Annual returns. Annual returns are not required for VAT in Egypt.
Supplementary filings. No supplementary filings are required in Egypt.
Correcting errors in previous returns. Correction of errors can be done online through amended VAT returns unless the taxable person is under an ongoing evasion case or has received an inspection request. The difference in VAT due between the original VAT return and the amended VAT return will be subject to an additional tax. This additional tax is calculated at a rate of 1.5% of