Importing Goods and Services Under VAT Law in Egypt

The concept of importation is a cornerstone of Egypt’s Value-Added Tax (VAT) Law’s philosophy, as many industries in Egypt rely entirely on imports, while others cannot produce their final products without obtaining inputs from abroad. In some cases, the importer is different from the entity owning the goods at the time of importation, necessitating proactive tax planning, forecasting tax implications, and integrating tax compliance workflows with the company’s financial strategies.

Generally, goods imported from abroad are subject to VAT, regardless of the purpose of importation, except for specific exemptions or other tax benefits. Only the individual or entity designated as the importer in Egypt is entitled to deduct input VAT, provided they retain the required customs documentation. If the VAT-registered person is not the importer, they are not eligible to deduct VAT on imported goods.

Exemptions from VAT Payment on Imported Goods at Customs Clearance

Typically, VAT on imported goods becomes payable at the customs clearance stage. However, there are numerous scenarios where VAT is not required on imports. One such instance is when the tax is verified as having been paid by a non-resident registrant. Consequently, it is essential to have a clear understanding of tax obligations, particularly regarding the following:

• Who is responsible for remitting the tax?
• Are there legal exemptions from tax remittance?
• Are there cases where tax payment can be deferred (temporary clearance or tax-suspension arrangements)?
• When is the tax due?

A precise understanding of the timing and responsibility for tax obligations protects companies from duplicate payments, preserves their rights, and enhances liquidity.

Importation of Tax-Exempt Goods from Abroad    

For goods imported from abroad that are entirely exempt from customs duties, the tax base is the value used to calculate the customs duty, plus other taxes and fees, excluding the exempt customs duty. In cases of partial exemption or reduction of customs duties, the tax base is the value used to calculate customs duty, plus the reduced customs duty and other applicable taxes and fees. This must comply with the principle of reciprocal treatment stipulated in international agreements.

Importation by Non-VAT Registered Individuals

Persons importing goods but not registered for VAT purposes are required to pay VAT on those imports. If the importer does not hold an import license, the import process can proceed through an agent or representative, and VAT and other fees will be imposed on the importer.

Non-VAT-registered persons are not entitled to deduct VAT imposed on imports.

Valuation of Goods for Re-Exportation

Special provisions apply when goods are temporarily exported for processing or repair and subsequently re-imported. Upon re-importation, VAT is imposed only on the value added to the goods. Thus, the VAT valuation is consistent with the customs duty valuation indicated in the customs declaration.

Reverse Charge Mechanism

Services have a distinct nature compared to goods. While countries traditionally rely on customs duties as the primary means of collecting taxes on goods at the point of customs clearance—since customs serve as the primary gateway for goods entering the country—the question arose regarding an effective mechanism to collect taxes on services. This became particularly relevant with technological advancements, which have transformed how services are delivered without requiring physical presence in the country where the service is consumed. For instance, professional or consultancy services can now be provided remotely. As a result, the reverse charge mechanism was introduced, shifting the burden of tax remittance from the supplier of goods or services to the recipient of those goods or services.

Introduction of the Simplified Supplier Registration System

The simplified vendor registration system was introduced in Egypt as a successor to the reverse charge mechanism. This system allows non-resident suppliers to register when supplying services within the Republic.

It is worth noting that approximately 39 global companies, leaders in e-commerce and non-residents, have already registered for value-added tax (VAT) in Egypt. This registration has significantly contributed to expanding their activities in the Egyptian market. These companies have complied with submitting tax returns and maintaining simplified records. However, they must adhere to all procedures outlined by the Egyptian Tax Authority. Additionally, in certain cases, non-resident suppliers are entitled to recover taxes previously paid to safeguard their rights.

Some of the companies that have already registered under the simplified vendor registration system include:

• Amazon
• Google
• Bloomberg
• Digital River
• Meta
• Facebook
• Disney
• Apple
• eBay
• Huawei
• Netflix
• Samsung

How to Enhance the Import Aspect of VAT Law in Egypt

Flexibility and simplification of procedures for investors can be achieved through the following measures:

• Introducing special exemptions to allow tax remittance during the submission of tax returns.
• Establishing a customs warehouse system (temporary admission).
• Developing standards for the re-exportation of imported goods.
• Defining principles and standards for agents importing goods on behalf of other companies for commissions.

Conclusion

Egypt is classified as an importing nation rather than an exporting one, making importation a fundamental pillar of its industry and commerce. Consequently, the tax implications are significant, not only because importation occupies a substantial portion of the VAT Law but also due to the varied and diverse methods and forms of importation prevalent today.

A comprehensive understanding of the tax implications of importation—both legislatively (the provisions of the law) and practically (how practical issues in importation relate to the law)—is essential for improving the tax environment, steering it in the correct direction, and fostering greater confidence among investors in the Egyptian market.

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