Habemus VAT executive regulations: The Finance Ministry issued the executive regulations of the value-added tax (VAT) law yesterday. The ministry says the executive regulations clarified definitions, including, for example, contentious items like what “professional services” entail, and resolved ambiguity on exemptions and processes. It also explains the transition to VAT and exemptions, and outlines that VAT comes with a unified dispute resolution mechanism and clear procedures for appeal and the executive regulations consolidate reporting into just one tax filing. VAT tax evasion was also labeled a felony involving a breach of public trust that carries a five-year prison sentence and a EGP 50k fine. Deputy Finance Minister Amr El Monayer said the ministry will issue more guidance to add further clarification on how certain specific sectors will be treated under the VAT regime. Here are the key highlights from our reading of the Finance Ministry’s release:

You will get a tax refund if you paid VAT on goods and services that are exported regardless of the degree of processing. Also refunded are additional taxes paid as well as credit due to taxpayers that was retained for six or more periods. VAT is refunded on capital goods used in producing goods and services that are themselves subject to VAT as long as the initial VAT is not expensed. Overall, tax rebates will be processed in a maximum of 45 days, according to the executive regulations.

Contracts signed before implementing VAT for goods and services that were provided in a time period before and after implementing the VAT law have to be amended to include the VAT on the portion of the contract deliver after the law came into effect.

Taxpayers are also allowed to deduct VAT paid on production inputs. These deductions are also applicable to VAT-exempt tax agreements with other sectors including international organization, oil and gas and mining agreements, and for diplomatic missions as well, as long as the treatment is reciprocal.

Also outlined is how VAT is calculated for used goods, sales on installments, and bartering. For bartering the appropriate VAT rate is calculated based on the market price of the good or service being exchanged. For installments, the tax only takes into account the interest payments in excess of the CBE discount rate, anything less than that is VAT-exempt. Used goods being resold will have VAT applicable to only 30% of the resale’s value.

Also on the VAT exemptions list:

• Financial transactions between subsidiaries and parent companies.
• Stock market transactions.
• Work done by companies’ rep offices abroad.

Not required to register for VAT altogether along with business turning over less than EGP 500k a year:

• Producers and importers operating in activities that are not subject or exempt from VAT.
• Providers and products and services that are only bound by tax schedules.

Meanwhile, the Egyptian Tourism Federation is still urging the government to postpone imposing the VAT on the sector for one year until conditions improve, says Daily News Egypt. The federation plans to submit a formal request to the Finance Ministry soon to explain how the tax could further strain the industry, sources said. No word yet on how lawyers, who have filed a lawsuit to shut down the law, have taken it.