Egypt: Issuance of Law No.3 to update the VAT and Stamp Tax Laws

In brief

The Egyptian government has issued new amendments to the VAT and Stamp Tax Laws.

The new amendments have been issued by a virtue of law no.3 of 2022, published in the Egyptian official gazette on 26 January 2022 and effective 27 January 2022 onwards.

The amendments introduced several updates to the provisions of the VAT law no. 67 of 2016 in addition to one significant update to the stamp tax law no 111 of 1980.

Advertising Services

Advertising services have become subject to VAT at the general rate of 14%, except for the following types which are exempt from VAT:

• The advertisements issued for the purpose of notifying the public of the orders issued by a public authority or raising awareness including the advertising issued by government tourism and information service departments

• The advertisements of donations for medical treatment and health care at hospitals and governmental institutes

• Mandatory sale, election, job seekers and lost people advertising

• The advertisement pertaining to regulating work within establishments  

Schedule tax

The new amendments have rephrased the provisions related to some goods and services that are subject to schedule tax (first table) in addition to the goods and services that are subject to schedule tax and VAT (second table).

The rephrasing included items such as vegetable oils, animal oils, air-conditioning devices, supply and installation works. However, the same schedule tax rates were maintained.

A new item has been introduced by the amendments to be added to the first table attached to the VAT law in relevance to the goods and services that are subject to schedule tax.

The new item is the commercial identity and customer relationship, that shall be subject to schedule tax at 10%,  which is calculated on 10% of the rental and/or selling value as a tax base. 

Exemptions

The new amendments have rephrased the provisions related to some goods and services that are exempt from VAT and expanding their scope by including additional items.

The new items included sanitation services, non-touristic marine transportation services for individuals, air transportation for individuals, vaccines, blood and its derivatives and family planning products.

Moreover, medicine and the relevant production materials shall be exempt based on a decree to be issued from the Egyptian drug authority.

Freight services related to imported beans, grains, food salt and manufactured species are now exempt from VAT.

While medically equipped cars for individuals with special needs are no longer exempt, without prejudice to the provisions of the law of the rights of persons with special needs no. 10 of 2018.

Services provided by the Suez canal authority for the transiting ships, including the transit fees, are now exempt in addition to disregarding the uncollected tax for the period prior to the issuance of this law.

Governmental Transactions

According to the new amendments, governmental ministries, departments, agencies, local administration units, public bodies and other juridical persons are now obliged to pay the schedule tax due directly to the ETA within 10 days from its due date.

Moreover, such entities have to remit 20% of the VAT due directly to the ETA on behalf of the vendors.

Penalties

The law has introduced a new penalty of 1% of the VAT/schedule tax due to be imposed on the taxpayer who violates the provisions, procedures or regulations of the law without being considered as an act of tax evasion.

The penalty shall not be less than EGP 1,000 and shall not exceed EGP 10,000, that should be paid along with the VAT/schedule tax and additional tax due.

Noting that the above penalty could be doubled in case of repeating the violation within three years. 

Foreign Visitors Purchases

Foreigners visiting Egypt for a period of three months or less have the right to refund the VAT paid on their purchases upon leaving the country.

However, the refund is only applicable in case the amount is not less than EGP 1,500 for each invoice and the purchased items leave the country with the foreign visitor or by any other mean.

Stamp Tax

Advertising Services

The advertising services are no longer subject to stamp tax duty at 20% after the issuance of law no.3 of 2022.

However, such services are now subject to VAT at 14% as stipulated by the new amendments.

The takeaway

• Goods and services imported/exported by projects operating within the economic zones of special nature are subject to 0% VAT under certain conditions.

• The law introduced some new concepts to be added to the VAT law, such as the simplified registration system and the registration for reverse charge purposes.

• The simplified vendor registration system allows non-residents to register in Egypt for VAT purposes as will be clarified further upon the issuance of the executive regulations of the law.

• Resident and unregistered juridical persons who sell goods or perform services that are not subject to VAT, while importing services that are subject to the VAT/schedule tax are now required to be registered at the ETA for RCM purposes

• Machinery and equipment used for industrial purposes could be exempt from VAT under certain conditions.

• Some new exemptions have been introduced by law such as freight services related to beans, grains, food salt and manufactured species are now exempt from VAT.

• Commercial identity and customer relationship is subject to schedule tax at 10%.

• New procedures have been issued for VAT/schedule tax remittance in connection to governmental transactions.

• A penalty has been capped at EGP 10K for violating the provisions of the law.

• Foreign visitors are able to refund the VAT charged on their local purchases under certain conditions. 

• Advertising services are no longer subject to stamp tax at 20%, but rather subject to VAT at 14%.