Mabrouk consumer finance players
Consumer finance providers are in line for an exemption from value-added tax (VAT), under an agreement the Financial Regulatory Authority reached with tax authorities, FRA Deputy Chairman Islam Azzam said in a statement (pdf). This came as the regulator sought to give consumer finance players the same VAT treatment afforded to other non-banking financial services (NBFS) providers including mortgage finance firms, leasing and factoring companies, and securitized bonds advisors under its purview.
The Tax Authority will still need to amend the list of VAT waivers in VAT Act’s executive regulations for the exemptions to take effect, but the prospect seems very likely. This will simply need the Finance Minister’s sign off and won’t need to go to the legislative branch.
Why weren’t they already exempt? That’s because consumer finance is now under the FRA’s purview. The industry was brought under the umbrella of the nation’s NBFS regulator after the Consumer Credit Act was signed into law last year. FRA-regulated NBFS providers are automatically subject to exemptions under the executive regulations of the 2016 VAT Tax Act, Azzam noted.
How big is this sector? Consumer finance providers doled out nearly EGP 5.5 bn to some 515k borrowers during the first five months of the year alone, Azzam said. Since the Consumer Credit Act passed last year, 12 companies specialized exclusively in consumer finance and 13 other non-specialized players were awarded licenses, he noted.