Tax Update 01

Executive Summary

On June 3, 2021, Ministerial decree No. 286 of 2021 was published in the Official Gazette. The mentioned decree issued the executive regulation of Unified Tax Procedures Law No. 206 of 2021.

The executive regulations introduced new definitions, principles and interpretations. The decree will be applied from June 4, 2021.

Update Highlights

The executive regulations added new terms and interpretations to be aligned with Unified Tax Procedures Law and the digital transformation of Egyptian Tax Authority. Moreover, some of the key elements within the issued executive regulations are highlighted below:

• E-receipt: Electronic document issued to the consumer or customer.
• Coding System: System used in classifying commodities and services in order to be used in issuing e-invoices or e-receipts.
• Associated Person: Any person associated to a taxpayer by a relation affecting the determination of the taxable base directly or indirectly, through management or control or possessing.
• Taxpayers will be able to submit documents and data in any language other than Arabic, provided that they are translated and certified by any authorized translator from tax authority.
• Confidentiality of the taxpayers’ data are maintained.
• Transfer pricing documentation rules have been interpreted.
• New registration and declarations forms have been issued.
• Tax declarations submission should include the required detailed data attached. Otherwise, it will not be approved.
• E-invoice system terms and security standards have been set.
• E-invoice service provider license regulations have been declared.
• Additional information and requirements have been added to the e-invoice and the professions e-receipt.
• Clearing conditions and procedures have been interpreted.
• Appeals may be submitted electronically in accordance with Minister of Finance decree to be issued in this regard.

Update Details

1. Transfer Pricing

Every legal person who has commercial or financial transactions with related parties is obliged to provide the tax authority with the related documents namely:

Master File: Which includes information on all group members.

Local File: Which includes the transactions of the local taxpayer and its analysis.

Country by Country Report (CbCR): Which includes financial information on associated persons in the group.

The executive regulations clarified that the non-resident juridical persons and running its activity through permanent establishment are subject to the above-mentioned obligation. Provided that the aggregate related parties’ transactions exceed EGP 8,000,000 within the taxpayer financial year. Noting that the aggregate transactions are including revenues and expenses.

In addition, all juridical persons including free zone companies and permanent establishment of non-resident entities are obliged to submit CbCR according to 2018 Transfer Pricing Guidelines issued by Egypt Minister of Finance.

2. E-invoice System

Every legal person selling commodities or rendering services are obliged to apply the terms and standards of e-invoice system. Below are some of the key elements highlighted within the executive regulations:

• Obtaining e-signature certificate.
• Using the unified coding system.

Noting that e-invoice system will be applied gradually.

Technical standards should be applied such as:

• Valid e-signature of the invoice issuer should be maintained.
• Sending invoices instantly through the service provider or tax authority to check the invoice and e-signature validity.

E-invoice service provider license regulations:

• License applicant should be Egyptian Joint Stock Company (Fully owned by Egyptians).
• Pay license fees.
• The legal representative of the company has not previously been convicted of a tax evasion offense.
• Managing the digital seals issued to him, according to which he is authorized to carry out his tasks, control and protect them.

Key additional information should be added to the e-invoice:

• Commodity or service code according to the unified coding system.
• Recording exchange rate of Central Bank of Egypt when issuing foreign currency invoice.
• Identifying the purchaser type (Corporate – Individual – Foreigner – etc.).
• Recording company activity code and branch code of the invoice issuer.
• ID or passport number for non-registered individual if the invoice exceeding certain amount that will be published by Egyptian Tax Authority Head.

Key additional information should be added to the professions e-receipt:

• Service provider name, tax registration and ID number.
• Headquarter / branch address.
• Syndicate registration number.
• Beneficiary name and ID number.
• Service delivery date, type, due amount, due table tax and service code.

3. Clearing

Clearing application conditions have been interpreted as follows:

• The amounts owed to the taxpayer (tax credit balance) shall be final and free from any dispute.
• The amounts owed to the tax authority must be payable.

4. Appeal

• The executive regulations added a new electronic method for appeal submission as the taxpayer can submit his appeal through tax authority e-portal in accordance with Minister of Finance decree to be issued in this regard.

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Responsibility & Commitment

ALPHA ADVISORS tax team has prepared this summarized tax update to introduce Egypt Minister of Finance Decree No. 286 of 2021.

Efforts have been combined to produce this report with clear and accurate content; however, this report aims only to spread general information and not intended to be relied upon as accounting, tax, legal or other professional advice. Please contact ALPHA ADVISORS for tailor made solutions.

Prepared By:

Mohamed Said – Tax Partner

WWW.Alphaadvisors.net