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Tuesday, 16 October 2018

Online retailers now have to charge and remit VAT

** #4 EXCLUSIVE- Online retailers now have to charge and remit VAT: The Finance Ministry has notified e-commerce platforms, including Souq, Jumia, and OLX, that they will be required to begin charging value-added tax (VAT) on all transactions in goods that would be subject to VAT if sold offline, government sources told Enterprise yesterday. Some platforms have already responded and incorporated the 14% duty into their billing systems, the sources said, adding that companies will be required to settle their VAT payments to the government at the end of every month as other retailers do. We had previously reported that the Finance Ministry had developed a framework for taxing e-commerce platforms, which it was planning to introduce alongside a batch of other amendments to the Income Tax Act.

Taxing social media ads is proving harder than the government expected, according to one source, who told us that the Tax Authority has been facing difficulties liaising with companies including Facebook and Google. We had reported last month that the ministry was completing a study on how to tax ads on social media and was considering provisions that would have them pay the VAT on sales.

On a related note, the Finance Ministry has apparently rejected proposed legislative amendments that would raise the ceiling for VAT exemptions, according to the sources. As it stands, businesses with turnover of less than EGP 500k a year are exempt from VAT. We had heard that were suggestions to raise that ceiling to EGP 1 mn in order to accommodate SMEs making less than that amount.

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