VAT in Egypt: Changes and Implications
On September 7, 2016, Law No. 67 on Value Added Tax was issued in the Official Gazette in issue number 35 repeated J, which cancels the General Sales Tax Law No. 111 of 1991.
This marks the beginning of a new tax period with different transactions and tax rates. In this law, some tax concepts and rates have been amended, and the names have changed from General Sales Tax to Value Added Tax.
As a result, the tax rates have been changed from 10% to 13% starting from September 8, 2016. Furthermore, these rates were increased to 14% and implemented on July 1, 2017. This applies to all goods and services except those classified under Table tax first and Table tax second
-Table tax first ;- includes goods subject to different rates than the general price,
-Table tax second :- includes some goods and services subject to specific rates, in addition to a 14% value-added tax.
Additionally, 58 items have been exempted from Value Added Tax.
Submitting Value Added Tax declarations electronically.
The Egyptian Tax Authority has introduced a new system for submitting electronic Value Added Tax declarations starting from January 2019. It is now mandatory for all taxpayers, however the manual submission of Value Added Tax declarations will no longer be accepted, except through the Egyptian Tax Authority’s website
With the developments taking place in the tax environment in Egypt, new mechanisms have been introduced to facilitate the submission of VAT returns for both taxpayers and the tax authority. This has been done through the implementation of the electronic invoicing system, in accordance with Law No. 206 of the Unified Tax Procedures Law, Article 35.
The implementation of this system has been carried out in several stages, starting from 2020, as per Decision No. 188, which mandates the issuance of electronic invoices and receipts, in compliance with the technical and legal requirements set by the head of the tax authority.
These stages will conclude in July 2023, after which any invoices or receipts issued will not be considered valid. Furthermore, to enhance the ease of submitting tax returns and utilizing electronic invoices, and to provide further facilitations for taxpayers, certain amendments have been made to Law No. 67 of 2016, the Value Added Tax Law.
These amendments have been introduced through the issuance of Law No. 3, effective from January, as published in the Official Gazette No. 3, Dated January 26.
According to this law, special economic zones with specific tax privileges, similar to those enjoyed by free zones, have been granted these privileges.
These privileges include exemption from tax on imports and exports of goods within these special economic zones (zero-rated treatment).
Additionally, the tax liability for these zones has been suspended for machinery and equipment purchased from the local market for a renewable period of one year.
If it is determined that these machinery and equipment have been already used in manufacturing, they will be exempted from tax.
Therefore, under this provision, special economic zones are now treated with the same privileges applied to free zones, to encourage economic growth in these special areas.
As per the law, the provision regarding advertisements has been added from Stamp Tax Law No. 111 of 1991 to Value Added Tax Law, making it subject to a 14% value added tax instead of a relative tax rate of 20%.
Furthermore, certain goods and services are exempt from Value Added Tax, with a total of 16 items listed.
Additionally, according to the law, owners are required to impose a 1% tax on the rental or sale value of commercial properties, which is the responsibility of the tenant.
This tax is known as the ” Table tax ” and the landlord is required to remit it to the tax authority .
The issuance of Law No. 67 on Value Added Tax in September 2016 marked a significant shift in Egypt’s tax landscape, replacing the General Sales Tax and introducing various changes in tax concepts, rates, and exemptions. The transition from 10% to 13% and later to 14% tax rates, along with the introduction of electronic tax declarations and e-invoices, aimed to modernize and streamline the taxation system. Special economic zones were granted tax privileges to boost economic growth, while the incorporation of certain provisions from the Stamp Tax Law into the Value Added Tax Law reflected a shift in tax treatment. These changes, including the imposition of a 1% tax on commercial property transactions, have had a profound impact on Egypt’s taxation framework, fostering a more efficient and structured tax system in the country.
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