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Amendments to Egypt's VAT Law Including New Simplified Registration for Non-Residents — Orbitax Tax News & Alerts

The Egyptian Tax Authority has published a copy of Law No. 3 of 2022, which was originally published in the Official Gazette on 26 January 2022. The law contains several amendments to the Value Added Tax Law. Key points include:

  • A 0% VAT rate is provided for goods and services exported by projects operating within special economic zones, as well as goods and services imported by such projects from abroad or other parts of Egypt outside the zone;
  • Provisions for a new simplified VAT registration system are introduced for non-resident suppliers of goods and services that do not carry out activity through a permanent establishment in Egypt and make supplies to non-registered persons;
  • New reverse charge and registration requirements are introduced for non-registered persons that supply goods and services not subject to VAT and import services that are subject to VAT;
  • An exemption from reverse charge requirements is provided for registered persons importing services if the non-resident supplier is registered under the simplified registration system, as well as an exemption from VAT collection by customs on imported goods if the non-resident supplier is registered;
  • VAT suspension is provided for a period of one year with a possible one-year extension for machinery and equipment that is purchased locally or imported for industrial purposes, except by service companies, which is converted to a VAT exemption if the machinery or equipment is used for industrial purposes within the one or two-year period suspension period and the following five years, otherwise, VAT will become payable;
  • VAT exemptions are expanded to include supplies of sanitation services, non-touristic marine transportation services for individuals, air transportation for individuals, and freight services for certain imports, including beans, grains, and food salt;
  • New penalty provisions are introduced for violations not considered tax evasion, which includes a penalty equal to 1% of the VAT due, with a minimum penalty of EGP 1,000 and a maximum of EGP 10,000, which is doubled in case of repeat violations; and
  • VAT at the standard rate of 14% is introduced on advertising services, replacing 20% stamp duty, with an exemption provided for certain advertisements including those issued by the government and public authorities.

The measures of Law No. 3 of 2022 are generally in force from 27 January 2022, although executive regulations need to be issued for the new simplified VAT registration system. Once issued, a six-month grace period is to be provided for non-resident service suppliers and a two-year grace period for suppliers of goods. Further details will be published once available.