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Latest Amendments to Egyptian VAT Law

Law No.3 of 2022

Taxes are an essential source of income for both developing countries, and countries with strong economies. It is an effective financial tool for financing state expenditures and increasing the public revenues needed to sustain their services to members of society.

VAT is one of the core types of indirect taxation, as it applies to all commercial activities across all levels of the supply chain. Defined, It is a composite tax imposed on the difference between the original price of the good/service, and the commercial price for the same good/service. 

At the end of this chain is the consumer, who bears the VAT amount, the Egyptian Constitution has been amended to encourage the State to adopt modern tax systems and review existing tax legislation in order to advance economic development and stimulate investment, without adding further burdens to citizens, in addition to introducing certain tax exemptions for some sectors.

Accordingly, the government has submitted an amendment to some articles of the Value Added Tax Act No. 67 of 2016. On 12 December 2021, the House of Representatives approved such amendments and issued law No.3 of 2022 stating the following:

The most notable of these amendments were the follows:

  • Goods and services exported by projects of economic zones to free markets abroad, or received by said free markets, are subject to (zero) Tax.
  • Suspending the performance of tax on imported or domestic industrial production machinery and equipment for one year. 
  • Exemptions were given to services performed by the Suez Canal Authority for ships in transit, including for transit
  • Ensuring that tax refunds do not exceed the credit balance of the goods and services for which the tax credit applies.
  • Family planning fields and medical supplies, including medicine and substances to produce vaccines, and blood banks are exempt from paying VAT.
  • Sanitization and purification or desalination services are exempt from paying VAT.
  • Guarantying the right of foreign visitors to leave the country, up to a maximum of three months, to recover the tax previously paid to a registered seller, provided that the amount of their receipted purchases are no less than £1,500, as opposed to the previous limit of 5000 LE.
  • Commercial and Administrative units are now subject 1% VAT instead of 14%
  • Seven types of advertisement are exempt from VAT, most notably are media advertisements or public safety announcements, and advertisements for employment.
  • Every non-resident and non-registered person who sells goods or performs taxable services to register in the simplified registration system.

Law Reference

To conclude, the aim of this article is to highlight those efforts made by the Egyptian state to upgrade and simplify the country’s tax system, by adopting modernized platforms which make tax collection and payment more efficient and accurate. This in turn, will positively impact the country’s economic stability.

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Written By

Khaled Ali - Tax Partner / Noor Mahdy - Attorney at Law

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