An Amendment to the Executive Regul

On 12 November 2017, the Minister of Finance issued Decision No. 329 of 2017 (the “Decision)[1] amending the Executive Regulations of the Value Added Tax Law No. 67 of 2016 (the “VAT Law”)[2] that was issued in September 2016. The amendment concerns an exception on monthly reporting requirements and restricts the grace period allowed for submitting the monthly reports for companies in which the State owns a stake that is larger than 50%.

Background

The VAT Law, issued in September of last year, repealed the General Sales Tax Law that had been applicable since 1991. Replacing the sales tax, the VAT currently applies to most goods and services at a standard rate of 14%. In addition, the VAT Law contains a schedule of goods and services that are subject to different tax rates called the “Schedule Tax". These goods and services mainly fall into two groups: Schedule Tax goods and services that are subject to Schedule Tax rates exclusively (such as professional, consulting, and construction services), and Schedule Tax goods and services that are subject to both the Schedule Tax and the standard VAT rate of 14% (such as telecom and mobile operation services). The VAT Law applies to natural and juridical persons in the private and public sector, as long as the value of their operations reaches the registration threshold provided under the VAT Law, as well as every importer, exporter, and distributor of a good or service that is subject to tax under the VAT Law, regardless of the value of their operations. Article (14) of the Law necessitates that all entities subject to its provisions submit monthly reports containing the value of due tax within two months at most from the end of the tax period (which is one month). Said report must be submitted even if no sales were made during the tax period. The VAT Law further imposes penalties in the event that there are delays in the submission of the report or payment of due tax. In this regard, the Executive Regulations issued by Minister of Finance’s Decision No. 66 of 2017 in 7 March 2017[3] states in Article (16) that the Head of the Tax Authority may issue an approval that allows importers and exporters who import or export only once or twice a year to submit only one report for the month in which the export or import operation has taken place, instead of the monthly report.

Decision 329/2017

The recent Decision amends Article (16) of the Executive Regulations by adding a commitment on companies in which the State owns a stake that is larger than 50% to submit their reports and make payment of due tax by the first day of the second month following the end of the tax period. This reduces the grace period for these companies from two months to one. In addition, the amendment adds “service providers” to one/two-time importers and exporters in favour of whom the Head of the Tax Authority could issue an approval allowing them to submit only one report for the tax period during which the import, export, or service provision operation was undertaken.   [1] Minister of Finance Decision No. 329/2017 amending certain provisions of its Decision No. 66/2017 enacting the Executive Regulations of the Value Added Tax Law No. 67/2016, Egyptian Gazette, Issue No. 255 (cont.) (b), 12 November 2017. [2] Law No. 67/2016 on the Value Added Tax, Official Gazette, Issue No. 35 (bis) (c), 7 September 2016. [3] Minister of Finance Decision No. 66/2017 enacting the Executive Regulations of the Value Added Tax Law No. 67/2016, Egyptian Gazette, Issue No. 55 (cont.) (a), 7 March 2017.