Back to the complete issue
Wednesday, 3 April 2019

FinMin looks to tax the living daylights out of social media ads, e-commerce players

EXCLUSIVE- FinMin looks to tax the living daylights out of social media ads, e-commerce players: The Finance Ministry is moving ahead with plans to impose a mix of VAT, income, stamp, and development taxes on social media and e-commerce platforms and internet search ads, a senior government official told Enterprise. The move will see the ministry to draft legislation enshrining the tax treatment of each category of activity and will require amendments to the VAT Act, the Stamp Tax Act, the Income Tax Act, and the E-Commerce Act. The ministry will likely require three months to draft the amendments, which will require signoff from cabinet before going to the House of Representatives for review and approval.

SMART POLICY- The move will businesses operating online the same as their brick-and-mortar competitors.

  • Companies running ads on social media platforms, including Facebook, Twitter, and Google, would be obliged to pay a stamp tax of 15-20%, treating social media buys exactly the same as with print ad purchases.
  • Companies operating online would pay the standard 22.5% income tax on profits, while sole traders would be taxed at their marginal rate.
  • The ministry has yet to determine the value of the development fee it plans to impose on e-commerce activities.
  • E-commerce platforms such as Amazon’s Souq as well as Jumia and OLX would be charged 14% VAT on all sales made online.

Background: Taxing social media and e-commerce activities has been on the government’s to-do list since the introduction of the VAT in 2016. Since then, the Finance Ministry has been looking at different ways to tax online ads and retail. A ministry source told Enterprise in September that the ministry was studying how to charge and remit 14% VAT on social media ads. The Finance Ministry also told us in October that it was requiring e-commerce platforms including Souq, Jumia, and OLX to charge VAT on all transactions that would be subject to the tax if sold offline.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of HSBC Egypt (tax ID: 204-901-715), the leading corporate and retail lender in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Mashreq (tax ID: 204-898-862), the MENA region’s leading homegrown personal and digital bank; Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt; Hassan Allam Properties (tax ID:  553-096-567), one of Egypt’s most prominent and leading builders; and Saleh, Barsoum & Abdel Aziz (tax ID: 220-002-827), the leading audit, tax and accounting firm in Egypt.