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Thursday, 16 December 2021

Snacks aren’t getting the VAT treatment

Breaking down the VAT Act amendments: Earlier this week, the House of Representatives gave its final approval to amendments to the VAT Act that change up the tax treatment for a handful of services and products, as per a committee report (pdf). Other new stipulations in the newly-passed amendments:

The big news is in what won’t be subject to the VAT in the final version of the bill, including crackers and sweet pastries. An earlier version of the amendments had proposed subjecting these goods to the 14% VAT, but this was scrapped in light of accelerating inflation, Finance Ministry spokesperson Ragab Mahrous confirmed to Enterprise. These goods will continue to be subject to the 5% schedule tax currently imposed on them. Lawmakers had one eye on inflation as they discussed the bill, with House Planning and Budgeting Committee deputy Yasser Omar previously telling us that they were considering postponing the bill altogether because of inflation.

Other VAT exemptions: A handful of medical supplies — meds, active substances, vaccines, blood collection bags, birth control methods, and blood and its derivatives — are all exempt from the tax. The bill also exempts machinery and equipment imported from abroad, production inputs for the paper industry, as well as agricultural products such as seeds, vegetables and fruits produced locally. Civil aircrafts, along with their engines, parts, components and spare parts won’t be subject to VAT, either. Shipping companies also won’t be required to pay VAT on transit fees paid to the Suez Canal Authority.

Office and commercial spaces will be subject to a 1% schedule tax on the rent or purchase value, Mahrous said, confirming previous announcements from the Tax Authority.

Ads are subject to VAT — with some exceptions: Under the bill, the 14% value-added tax will be imposed on fully-finished “broadcast” advertisements — advertisements on TV, radio, outdoor billboards and the interwebs — replacing the 20% stamp tax to which they were previously subject. However, the amendments exempt PSA-style ads from the tax, including ads for donations to or medical treatment at government hospitals and institutes; election and job seeking announcements; missing persons announcements; and all ads or announcements that are meant to inform the public about laws or regulations.

Tourists will be able to claim VAT rebates on their way out of the country for any purchases on select items worth more than EGP 1.5k or more (as opposed to the previous EGP 5k threshold for VAT drawbacks).

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