Tax Update 03

VAT and Stamp Duty

Tax Update 03

VAT and Stamp Duty

ALPHA ADVISORS - Tax Update No. 03 - Law No. 3 of 2022

Executive Summary

Egypt: Issued Law No 3 of 2022 amending VAT Law No 67 of 2016 as long as Stamp Duty Law No 111 of 1980

VAT Law No 67 of 2016 Amendments
• On January 26 2022 Law No 3 of 2022 was issued amending VAT Law No 67 of 2016.
• New definitions have been introduced within VAT Law as follows.
• Non resident Registrant.
• The simplified vendor registration.
• Reverse Charge Mechanism (RCM).

Stamp Duty Law No 111 of 1980 Amendments

• In addition, a key update has been made of Stamp Duty Law No 111 of 1980.

Update Highlights

I. Law No 3 of 2022 included several amendments to VAT Law No 67 of 2016
II. Economic Zones of Special Nature has been added to provisions of VAT Law
III. The new law introduced a new definitions to be added to VAT Law as follows:

Non resident Registrant: Natural or juridical non resident persons who are obliged to register for VAT purposes and calculate the VAT due on selling goods or providing imported services for non VAT registrants in Egypt.

The Simplified Vendor Registration: A 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.

Reverse Charge Mechanism (RCM): A mechanism whereby the recipient of the goods or services is liable to pay the tax directly to the Egyptian tax authority (ETA) instead of the supplier or service provider.

IV. Tax on imported goods is not due to be collected by the Custom Authority under certain conditions.
V. Foreign Visitors are now able to refund the VAT on their local purchases under certain conditions.

VI. Machinery and Equipment used for industrial purposes could be exempted form VAT under certain conditions
VII. Governmental Entities are obliged to pay schedule tax due within 10 days from its due date directly to ETA In addition, such entities have to remit 20 of the VAT due on behalf of the vendors directly to ETA.
VIII. Penalties have been capped at EGP 10 000 for violating the provisions of the new law.
IX. Egyptian Tax Authority has the right to estimate the VAT under certain conditions.
X. The new law has rephrased several items that are subject to table tax only (first table) and items that are subject to table tax and VAT (second table).
XI. Some of the exempted items also have been rephrased.
XII. Advertising services are no longer subject to Stamp Duty at a rate of 20 but rather subject to VAT at a rate of 14 Update Highlights Cont. 09.

Update Details

First VAT

Economic Zones of Special Nature:

According to Law No 83 of 2002 and its amendments Economic Zones of Special Nature are areas outside the cities and villages that will be defined and issued by a president decree In addition, the decree may also include port (Sea, Air, Land) and may be located within the cities and villages if the projects activities nature require that.
According to Law No 3 of 2022 goods and services exported by projects operating within the Economic Zones of Special Nature are subject to VAT at a rate of 0%.
Moreover, the imported goods and services to Economic Zones of Special Nature for the purpose of practicing licensed activities shall be subject to VAT at a rate of 0% as well.
The above mentioned rate is applicable on all imported goods and services either imported from abroad or from the local market, except for passenger cars.
However, imported goods or services to economic zones of a special nature for the local consumption shall be subject to tax according to VAT Law.

The Simplified Vendor Registration and Non resident Registrant:

According to the new introduced simplified vendor registration system, every non resident and non registered persons who sells taxable goods or providing services to non registered persons is obliged to apply for registration under the simplified vendor registration system as will be specified by the executive regulations.
Simplified vendor registration system should be enforced within six months for services and within two years for commodities from the effective date of applying the mentioned system.
Persons registered under the simplified vendor registration system are not allowed to deduct their input VAT.
However, they have the right to refund their input VAT within 45 days from submitting a refund request along with the supporting documents.
In case the non resident registrant fails to comply with any of the obligations stipulated in the new law, the minister of finance may request the public prosecution to ban or restrict their access to the Egyptian market until they fulfills these obligations.

Reverse Charge Mechanism (RCM):

Residents and unregistered juridical persons who sell goods or perform services that are not subject to tax while importing services that are subject to tax are now required to be registered at the ETA for Reverse Charge Mechanism purposes.

Moreover, the juridical persons subject to RCM are obliged to calculate the tax on the imported services and remit to tax authority within 30 days from receiving the service unless the non resident service provider is registered according simplified vendor registration system.

Tax on Imported Goods:

The tax on imported goods is not due for collection upon release from customs if it is proven that this tax was collected with the knowledge of the non resident registrar.

Foreign Visitors VAT on their Purchases:

Foreigners visiting Egypt for a period do not exceed three months have the right to refund VAT paid on their purchases upon leaving the country.

The VAT refund is only applicable in case the purchases 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 means.

Machinery and Equipment:

The new amendments suspended the payment of the VAT due on machinery and equipment whether imported or purchased from the local market for industrial purposes, for one year from their custom release date or purchase date from the local market, and this period may be extended by a maximum of additional one year based on accepted reasons by Egyptian Tax Authority Noting that such suspension is not applicable for service providing companies.
In case it was proven to the Egyptian Tax Authority that such machinery and equipment were used in the industrial production within such period, it shall be exempt from VAT.
If the mentioned period ended without using the machinery and equipment in industrial production, the VAT and the additional tax become due from custom release/purchase data until the payment date.
Accordingly, it is prohibited to use such machinery and equipment for any other purpose rather than the one it is exempt for, (this is for five years following the exemption start date), before notifying the ETA and paying the relevant due VAT.

Given the VAT exemption on machinery and equipment, the refund of VAT on such machinery and equipment is no longer applicable However, entities whose licensed activities include the usage of buses and passenger cars are still able to refund the incurred VAT.

VAT on Governmental Entities:

According to the amendments stated on the new law, ministries, authorities, governmental bodies, local administration units, public bodies, and other general juridical persons are now obliged to pay the scheduled tax due directly to the Egyptian Tax Authority within 10 days from its due date.

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

Penalties Stated in General Provisions Chapter:

The new law has introduced a new penalty of 1 % (shall not be less than EGP 1,000 and not exceed EGP 10,000) of the VAT/schedule tax due to be imposed on any taxpayer who violates the provisions, procedures, or regulations of the new law without being considered as an act of tax evasion stated in the law.

VAT Estimation:

Egyptian Tax Authority has the right to estimate the VAT if the taxpayer did not submit VAT declaration.

Table Tax:

The new law rephrased the items No. 3, 4 and 9 that are subject only to table tax (first table) Below are the rephrased items
3- Vegetable oils
4- Animal oils
9- Construction (supply and installation)

Moreover, a new item (No. 15) has been added to the first table related to items that are subject only to table tax.

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

In addition, item No. 7 “air conditioning devices” that is subject to table tax and VAT (second table) has been rephrased.


Items No 5, 12, 14, 15, 17, 24, 25, 29, 31, 32, 41, 55 and 57 that are exempted from VAT have been rephrased and expanding their scope by including additional items.

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

Moreover, medicine and the relevant production materials shall be exempted based on a decree to be issued from Egyptian Drug Authority.

In addition, fright services related to imported beans, grains, food salt and manufactured species are now exempted from VAT.

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

Finally, services provided by the Suez Canal Authority for the transiting ships, including the transit fee, are now exempted in addition to disregarding the un collected tax for the period prior to the issuance of this new law.

Advertising Services:

Based on the new law amendments, the advertising services have became subject to VAT at a rate of 14% except for the following types stated in rephrasing item No. 57 of items that are exempted from VAT.

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

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

Mandatory sales, election, job seekers and lost people advertisements.

The advertisements pertaining to regulating work within establishments.

Second Stamp Duty:

The new law has abolish articles No. 60 and 64 of Stamp Duty Law No. 111 of 1980
Accordingly, the advertising services are no longer subject to stamp duty at a rate of 20%.
However, such services are now subject to VAT at a rate of 14% as stipulated by the new law amendments

Alpha Advisors has been established to provide wide legal and tax service through energetic and well experienced lawyers and tax advisors It has been incorporated to provide tailored and integrated legal and tax services across a wide rage of practice areas Whether you are start up, growing business, well established organization or an entrepreneur with big dreams and bigger goals, ALPHA ADVISORS is established to fit your needs.

Responsibility & Commitment:

ALPHA ADVISORS tax team has prepared this summarized tax update to introduce Law No. 03 of 2022. 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 tax, legal or other professional advice Please contract ALPHA ADVISORS for tailor made solution.



Prepared By:
Amira Mahmoud – Associate – Tax Service Line
Reviewed By:
Mohamed Said – Partner – Tax Service Line

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