To Integrate the Informal Economy into The Formal One… New Decisions Coming into Force

In a press release, the Egyptian Tax Authority announced the new amendment to the Value Added Act. - Published in the Official Gazette of the State - in force. This amendment provides that online delivery services provided by restaurants and businesses are subject to a 14% VAT. In October 2018, the Tax Authority informed e-commerce companies that their sales are subject to VAT, requiring them to pay tax at the end of each month, like other retailers.

In the first application of the new amendment, Reda Abdel Kader the head of the Egyptian Tax Authority revealed that a number of e-commerce companies had been referred to the prosecution for engaging in e-commerce without registration with the Egyptian Tax Service, in addition to several companies registered with the Authority but were not providing sales via websites in their tax returns.

The Head of the Authority explained that e-commerce companies that had reached the registration limit (£500,000) should register with VAT, as well as with providers of professional services and other services subject to schedule tax no matter how much they sell, so that these companies are not subject to the law. The penalty for tax evasion amounts to three to five years' imprisonment and it is a crime against honor.

Abdulkader pointed out that a trader who provided services through e-commerce had an obligation to provide income taxes, either by providing an annual declaration of net profit accompanied by payment of tax due, or by taking advantage of Act No. 152 of 2020 on medium, small and micro-enterprises, enjoys the benefits of the Act from having a definitive tax on his annual transactions according to the size of his business, as required by the Act for five consecutive years.

Through the new amendment, the Government aims to increase tax revenues by 18.3% in the coming financial year, to 983 billion pounds. Reports indicate that the Government is reportedly considering amendments to the Value Added Tax Act by the Ministry of Finance, which requires multinational technology companies to collect VAT on their e-commerce transactions, without disclosing what these amendments are.

On the other hand, the Ministry of Finance has issued a new decision providing that the consolidated tax registration number must be disclosed to the financier or taxpayer when advertising goods, services and other taxable activities as an essential and mandatory part of the advertising component so that they do not fall into cases of tax evasion.

For his part, Dr. Mohsen El Jayar, Director of the Finance Service of the Egyptian Tax Authority, said “The decision that the consolidated tax registration number must be disclosed to the financier or taxpayer when advertising goods and services has several objectives, the main of which is to surround trade operations conducted electronically without registration in taxes and which depend on the declarations of Social Media for their operation.”

He referred that Enterprises and companies engaged in advertising activities could deal with financiers or applicants only through a tax card or a registered certificate of registration containing the consolidated tax registration number of the financier or taxpayer, which must be mentioned and included in the form of advertising of the goods or service.

Al Jayar mentioned that the decision warns that failure to disclose the consolidated registration number constitutes tax evasion, which is a form of intimidation.

According to the Ministry of finance statement, in any of these Advertisements, enterprises and companies are required to record the consolidated tax registration number of the financier or taxpayer on the documents dealing with the financier or taxpayer.

Al-Jayar stated that among the objectives of the resolution are also to increase the number of financiers, increase the proportion of tax obligations and raise tax revenues, which were positive for the State Treasury's revenues and to improve services for citizens, as well as to integrate the informal economy into the formal economy.