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Egypt Provides VAT Guidelines for Digital Services and Other Remote Services Provided by Non-Residents — Orbitax Tax News & Alerts

The Egyptian tax authority (ETA) has published VAT guidelines for digital services and other remote services provided by non-residents. The main points of the guidelines are summarized as follows:

  • When a non-resident vendor renders remote services (e.g., electronic and digital services) to a customer in Egypt through, for example, a website, electronic distribution platform, social media store, or application, VAT must be paid in Egypt on the remote services;
  • Remote services are defined as any services where, at the time of the performance of the service, there is no necessary connection between the physical location of the recipient and the place of physical performance, including, but not limited to:
    • supplies of digital content, such as e-books, movies, TV shows, music, and online newspaper subscriptions;
    • online supplies of games, apps, software, and software maintenance;
    • website design or publishing services; and
    • legal, accounting, or consultancy services;
  • A service that requires the physical presence of a customer in a specific location to receive it ("on the spot" services) is not a remote service, even if booked online, such as hotel booking services, physiotherapy services, entry to entertainment or sporting events, restaurant and catering services, and passenger transportation services;
  • When a non-resident vendor makes a supply of remote services to a resident registered taxpayer (i.e., B2B supplies), the resident taxpayer is required to account for and remit VAT using the reverse charge scheme, with no obligation for the non-resident to charge or remit VAT, although the non-resident should request and confirm the resident taxpayer's tax registration number;
  • When a non-resident vendor makes a supply to a resident non-registered consumer (i.e., B2C supplies), the VAT obligations depend on whether the remote services are sold by:
    • a non-resident vendor via their own portal or application to the consumer, in which case the vendor has to register for a remit VAT (simplified vendor registration regime);
    • an electronic distribution platform (EDP) or by a non-resident vendor through an EDP, in which case the EDP has to register for and remit VAT (simplified vendor registration regime if the EDP is non-resident), although an EDP will not be responsible in certain exceptional cases where the EDP has only very limited influence or involvement in the services sold;
  • A remote service is considered rendered to a recipient in Egypt if:
    • the recipient is a non-registered person that has permanent residence in Egypt, based on collected residence information, payment information, and access information;
    • the recipient is a registered taxpayer in Egypt, unless the service is used predominantly by a permanent establishment of the taxpayer in another country; or
    • the recipient is a government body or a public or economic authority or any other authority or non-registered entity in Egypt;
  • The general VAT rate for non-residents is 14%, although a reduced rate of 10% applies for professional and consultancy services;
  • To register under the simplified registration regime, non-residents must create an account on the website, with videos provided on How to create an account on the ETA website and How to register under the simplified vendor registration regime;
  • Non-resident vendors are not required to appoint a fiscal representative and non-resident vendors that are already registered under the standard regime through a representative should apply for simplified registration after their representative applies to be deregistered;
  • The threshold for simplified registration in respect of remote services is the same as for standard registration, which is turnover of EGP 500,000 in any 12 months, but if the service is a professional and consultancy service subject to the reduced VAT rate, registration is required regardless of turnover;
  • Once successfully registered, non-resident vendors and EDPs are able to file simplified returns and pay the VAT due ( how to video), and may also apply for deregistration if they cease to carry out taxable activities in Egypt; and
  • VAT payment is accepted in EGP and USD, with other currencies to be accepted from December 2023.

In addition to the above, the guidelines also cover specific invoicing requirements, record-keeping requirements, tax refunds, and certain other matters. Frequently asked questions and an appendix listing exempted services are also provided.

The effective date of the rules for remote services is 22 June 2023.