Egypt Implements VAT Obligations for Foreign Digital Services

On June 22, 2023, Egypt introduced new VAT regulations affecting foreign businesses providing digital and remote services to Egyptian customers. This initiative aims to ensure compliance with VAT obligations and streamline the taxation process for non-resident vendors.

Guidelines for VAT Compliance

The implementation of Ministerial Decree No. 160 of 2023 changes how foreign operators of electronic distribution platforms (EDPs) engage with the Egyptian market. According to the decree, any foreign vendor rendering remote services to Egyptian residents is now subject to VAT, necessitating real-time validation through the Egyptian Tax Authority portal.

To clarify the new VAT obligations, the ETA has issued comprehensive guidelines applicable to both B2B and B2C transactions:

• B2B Transactions: The VAT obligations follow the Reverse Charge Scheme in these cases. Here’s how it works:
  • The Egyptian buyer is responsible for accounting for the VAT.
  • The non-resident vendor does not need to charge or remit VAT but must request and validate the Egyptian resident’s tax registration number through integration with the ETA’s API.
• B2C Transactions: The VAT obligations for B2C transactions vary depending on how the service is supplied:
  • Own Portal: If a vendor provides services through their own platform, they are required to register and remit VAT directly.
  • Using an EDP: If the service is supplied via an EDP, the responsibility to register and remit VAT shifts to the EDP.

When a vendor operates their own platform or the EDP is a non-resident vendor, the vendor must remit VAT through the simplified vendor registration regime. This regime allows for online VAT registration with minimal information required for submission to the ETA.

Importance of Compliance

Complying with these VAT obligations is critical for foreign vendors to avoid potential fines or legal actions, as stipulated in VAT Law No. 67 of 2016. The ETA has emphasized the need for adherence to these new regulations to ensure smooth business operations in Egypt’s evolving digital landscape.

In summary, introducing VAT for non-resident digital services is a significant step for Egypt in regulating foreign business activities, enhancing tax revenue, and aligning with global standards.

There’s more you should know about e-invoicing in Egypt – learn more about the new and upcoming regulations.