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Monday, 7 June 2021

The taxman rings twice

We’re going to be charged 14% VAT on all online delivery services provided by restaurants and shops, according to an executive amendment to the VAT Act (pdf) announced by Finance Minister Mohamed Maait yesterday. The law came into force last Thursday, 3 June.

What was happening before? Only some companies were required to collect and remit VAT on delivery fees under the original VAT Act. Under the law (pdf), retail and restaurant chains, tourist-trap restaurants, as well as retail stores and restaurants in airports and shopping malls, were required to charge the 14% levy on delivery fees. Individual shops and traders, meanwhile, were able to sell goods online without collecting VAT from the buyer.

What’s new? All restaurants and businesses with more than EGP 500k in annual revenues will have to charge and remit VAT on online delivery services, director of taxpayer services at the Egyptian Tax Authority Mohsen El Gayar told Enterprise yesterday. This is part of the state’s efforts to outline a framework for taxing e-commerce sales, he said.

This will help the government raise tax receipts: The Finance Ministry is looking to increase tax collection by 18% in the coming fiscal year, targeting total tax revenues of EGP 983 bn during FY2021-2022. The draft budget currently sees VAT revenues falling slightly, though it is unknown whether the additional tax on delivery services was factored into the ministry’s original calculations.

The amendment is the latest in a series of moves taken by the government to collect VAT on digital services: In October 2018, we had reported that the Finance Ministry has notified e-commerce platforms such as Souq, Jumia and OLX that they’ll be required to begin charging VAT on all transactions in goods that would be subject to VAT if sold offline. These companies have been required since then to settle their VAT payments to the government at the end of every month as other retailers do.

Where does Big Tech stand in all this? The government is reportedly drawing up separate VAT amendments that would require overseas technology companies to collect VAT on digital transactions. The specifics of the amendments remain unknown, as do their relation to the draft E-Commerce Act, which is also supposed to put in place a framework for taxing tech.

IN OTHER LEGISLATION NEWS- The House of Representatives has given preliminary approval to the long-awaited Sovereign Sukuk Act, Youm7 reports. The bill, which would pave the way for the government to begin issuing sharia-compliant bonds, will be put to a final vote during an upcoming plenary session.

The House SMEs committee yesterday approved a USD 50 mn loan from the Kuwait-based Arab Fund for Economic and Social Development that will support Egyptian SMEs, according to Youm7.

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