Suez Canal services may be exempt from VAT
Shipping companies are in line for a Suez Canal VAT break: Shipping companies would no longer have to pay VAT on Suez Canal transit fees under proposed amendments designed to make the canal more attractive to shippers. Under the draft changes approved by the cabinet yesterday, the Suez Canal Authority (SCA) would no longer have to charge and remit VAT on payments it receives from shipping companies for its transit services, according to a statement published following the weekly cabinet meeting. Any past VAT taxes the authority hasn’t still remitted will be waived should the amendments become law, the statement said.
Changes likely to be fast-tracked: The bill isn’t expected to take long to be ratified as the SCA has accumulated a large pile of unpaid VAT, and wants to avoid having to raise transit and service fees amid competition from other waterways, director of taxpayer services at the Tax Authority Mohsen El Gayar told us. The SCA has not paid VAT on services since the act passed in 2016, due to disagreements on whether they fall under the act’s purview, El Gayar said.
This is separate from the other VAT changes in the pipeline: The government had drafted and approved several changes to the VAT Tax Act last year as part of an overhaul to the 2016 legislation, but the changes are yet to make their way through the House. They include subjecting most commercial advertising to the tax, allowing tourists to claim VAT rebates, affording special economic zones including the Suez Canal Economic Zone the same VAT treatment as freezones, and closing exemptions for commercial and administrative real estate remain, among others.
The government is on a charm offensive right now to attract shipping companies to the canal. The SCA this week announced it would slash transit fees by up to 75% on some shipments travelling between Southeast Asia and Europe, the US and West Africa.
And there’s a good reason why: Suez Canal revenues are an important source of hard currency for Egypt, bringing in more than USD 550 mn in April — their highest month on record.
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