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Tax Incentives in 2022

Tax exemptions are certain exceptions to the general tax system, primarily used as tax incentives within the framework of the State’s fiscal policy. Exemptions generally waive the right to impose and collect taxes on revenues, in accordance with certain social and economic considerations. 

Following the recent turmoil in the global economy, starting with the corona pandemic, and more recently, the economic challenges resulting from the Russian and Ukrainian conflict, many problems have arisen, including disruption within supply chains, increased shipping costs, and high inflation rates.

Egypt has witnessed unprecedented developments in the tax system, such as the introduction of Law No. 3 of 2022 which was issued to amend provisions within the Value Added Tax Law No. 67 of 2016. These amendments were applicable to the goods or services exported by projects in regions, cities, free markets, and economic zones of a special nature outside the country, exempting them from VAT tax. Similarly, goods or services imported by projects carrying out licensed activities within regions, cities, duty-free markets, and economic zones of a special nature, are also given the same exemption (excluding passenger transportation).

More recently, e-commerce transactions have been subject to tax through the application of a simplified registration and collection system, instead of through the appointment of a legal representative. Additionally, recent changes have included the application of an electronic invoicing and receipt system to allow consistent monitoring of business transactions between financiers and consumers by exchanging all invoice data in a digital format. 

Furthermore, categories for tax refunds have also been increased to include goods and services subject to scheduled tax or taxes exempt abroad, taxes that were previously paid or charged on exported goods and services, regardless of whether they were issued in their original condition or altered/incorporated into other goods or services (as long as they do not exceed the credit balance of the goods and services for which the tax deduction is applicable).

In addition to refunding tax collected by default, credit balances that have passed more than six consecutive tax periods, tax previously paid on buses and passenger cars designated for the licensed activity of the facility, and tax incurred by a non-resident, are registered under the simplified supplier registration system for the purposes of carrying out its activity within the country.

Recently, a draft law was presented introducing new tax facilities for financiers and taxpayers in in various laws, providing a 65% deduction on delay penalties stipulated under the Customs Law No. 66 of 1963, Stamp Tax Law No. 111 of 1980, Law No. 147 of 1984 on Imposing a Fee for Developing State Financial Resources, General Sales Tax Law No. 11 of 1991, Income Tax Law No. 91 of 2005, The Tax Law on Built Real Estates No. 196 of 2008, Value Added Tax Law No. 67 of 2016 and Customs Law No. 207 of 2020; Provided that the taxpayer pays the remaining (35%) within a period starting from the date of enforcement of this law until 1-3-2023.

An additional 65% deduction on the delay penalty and the additional tax unpaid by the taxpayer, if the taxpayer pays the original tax due in full before the effective date of this law, provided that the remaining 35% is paid from the date of enforcement of this law until 1-3-2023

To conclude, the aim of this article is to highlight the state’s endeavor to improve the tax system, advance economic development, stimulate investment, enhance tax compliance, and raise the overall efficiency of tax collection.

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