On 29 August 2016, the Egyptian Parliament approved the long-debated Value Added Tax Law to abolish and replace the Sales Tax Law no. 11 of 1991 (the \u201cSales Tax Law\u201d).<\/p>\n
The Value-Added Tax Law was issued under no. 67 of 2016 (\u201cVAT Law\u201d or the \u201cLaw\u201d) and was published in the Official Gazette on the 7th of September 2016. It has an immediate effect as of 8th of September 2016.<\/p>\n
Implementation of VAT Law depends to a great extent on the release of the executive regulations which will clarify the methods of calculation and deduction of the tax.<\/p>\n
<\/a> 1.2<\/strong> The VAT will be levied on all goods and services whether manufactured locally or imported from abroad, at each stage of their supply chain, unless otherwise exempted by a special provision.<\/p>\n 1.3<\/strong> Goods are broadly defined to include all physical local or imported objects whatever their nature, source or purpose including electric power1<\/a><\/sup>, while services are defined to include all things which are not classified as goods.2<\/a><\/sup><\/p>\n 1.4<\/strong> The Law provides for the first time for its application on the purchases of goods and the provision of services which are performed through electronic means (i.e. online purchases).3<\/a><\/sup><\/p>\n 1.5<\/strong> According to Article (11) of the Law, taxpayers are required to amend their contracts with their clients and suppliers to reflect the new taxes imposed by the Law. A controversial provision that is waiting for the executive regulations to clarify stipulate its implantation rules.<\/p>\n <\/a><\/p>\n 2.1<\/strong> The Law imposed two types of taxes: 2.2<\/strong> The value-added tax (or the VAT), which is a fixed rate tax imposed on all taxable goods and services, whether locally produced or imported, for commercial or personal use. The VAT general rate is decided to be 13% for the fiscal year 2016\/2017, to be increased to 14% as of the fiscal year 2017\/2018. Different rates are however applicable as follows:<\/p>\n 2.3<\/strong> Article 3 of the Law provides that the Government will allocate 1% of the collected VAT to social justice programs.5<\/a><\/sup><\/p>\n 2.4<\/strong> The Law exempted a number of 57 goods and services from the VAT including:<\/p>\n b. Schedule Tax<\/strong><\/p>\n 2.5<\/strong> The Schedule Tax is another type of tax which is imposed only once, unless the goods are transformed or changed. Packaging, re-packaging, refining, purifying and milling of goods shall not be considered as transformation.6<\/a><\/sup><\/p>\n 2.6<\/strong> The Schedule Tax is imposed on a number of goods and services besides the VAT. Goods and services which are subject to both VAT Tax and Schedule Tax are considered to be luxury ones such as soft drinks, beers, alcohol products, wine and spirits, perfumes, cosmetics for skin and hair, televisions more than 32”, refrigerators more than 16 feet, air conditioners, golf cars, passenger vehicles, and mobile phone services.<\/p>\n 2.7<\/strong> Below are examples of the goods and services which are subject to both Schedule Tax (according to the variable rates shown) in addition to the VAT in the fixed rate of 14% for 2016:<\/p>\n
\n1.1<\/strong> The Value-Added Tax (“VAT”) is an indirect tax\u00a0on the domestic consumption of\u00a0goods and services, except on those that are zero-rated (such as\u00a0food\u00a0and essential\u00a0drugs) or which are otherwise\u00a0exempted\u00a0(such as\u00a0exports).<\/p>\n2. Two Different Types of Taxes<\/h3>\n
\na. Value Added Tax (VAT)<\/strong><\/p>\n\n
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\nThe full list of the exempted goods and services is attached hereto as Exhibit 1<\/a>.<\/li>\n<\/ul>\n