|Samar Abdel Rahman|
The Egyptian Minister of Finance has confirmed that the Executive Regulations of the Value-Added Tax Law No. 67/2016 will be released by the beginning of February 2017 after the Egyptian Parliament has approved 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 entered into force the day after it was published the Official Gazette.
The general VAT rate has been set at 13% for the fiscal year ending June 30 2017. From July 1 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; and
- 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 ($28,000) in the 12 months preceding the date of the VAT Law entering into force. The person or legal entity is obligated to register with the Egyptian Tax Authority (ETA) within 30 days of the effective date.
Any person or legal entity meeting or exceeding this threshold after the introduction of the VAT Law is obligated to register within 30 days after reaching the VAT registration threshold.
Businesses originally registered under the General Sales Tax Law will be automatically considered as registered for VAT, provided that their annual turnover reaches or exceeds the new registration threshold.
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, will need to 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 June 15.
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 rules that are set out in the law include:
- Penalties ranging between EGP 500 and EGP 5,000;
- Payment of the VAT, table tax and additional tax; and
- Penalties to be doubled if the breach is repeated within three years.