Two Ministry of Finance Decisions A

On 27 November 2019, two decisions were published by the Ministry of Finance (“MoF”) amending the executive regulations (“ER”) of the Value Added Tax (“VAT”) Law. The first decision pertains to the VAT Law reporting requirement and mandates that at least four tax returns are submitted to the Tax Authority in any given year. The four reports reflect a requirement to declare due VAT from monthly sales within two months at the latest from the end of each month. The second MoF decision contains the procedure for the submission of a letter of guarantee to the Tax Authority while the authority looks into a request for a tax refund/rebate submitted by a taxpaying entity.

1. MoF Decision No. 779 of 2019: VAT Reporting Should Not Be Less Than Four Times a Year[1]

By way of background, Article (14) of the Law mandates that every registrant submits a monthly report on due VAT and Schedule Tax[2] within two months from the end of the tax period (with the exception of the month of April, reporting on which must be submitted by mid-June at the latest). This reporting requirement applies even if the registrant has not made any sales within the one-month tax period. Registrants who fail to comply with this requirement face the risk of an assessment of due tax by the Tax Authority, in addition to potential criminal liability. In application of this provision, Article (16) of the VAT Law ER provided that registrants must submit said reports in electronic format through the Tax Authority’s e-portal starting from January 2019 and that payment of due tax must be submitted along with the report. MoF Decision No. 779 of 2019 adds a final clause to ER Article (16) stating that the number of submitted reports must be at least four reports within a given year.

2. MoF Decision No. 780 of 2019: Procedures for Expedited Tax Rebate/Refund Against an LG[3]

Both the old General Sales Tax Law, and the VAT Law provide for cases where a taxpayer could receive a tax refund. In this respect Article (30) of the VAT Law provides for the refund of tax within 45 days from the date of submission of a request with supporting evidence. Cases of refund/rebate according to this provision include tax applied on export goods or services, taxes collected in error or in excess. MoF Decision No. 780 of 2019 adds a new provision to the VAT ER allowing an entity to expedite a tax refund while the Tax Authority completes its assessment of the relevant supporting documents. This could be done by the entity’s provision of bank guarantee in the form of a legally and financially sound Letter of Guarantee ("LG") the value of which is at least 65% of the amount of the requested refund, and that the LG is irrevocable and renewable. This then prompts the Tax Authority to refund 65% of the requested amount within 15 days while it completes its full assessment of the request. The new provision sets out conditions for this procedure, including:

• The submission of supporting documents that prove payment of the amount, such as purchase invoices, and custom release forms, given that any remaining supporting documents must be submitted within three months at the most from the date of the refund request. The Tax Authority then has up to six months from the date of the complete submission to finish its assessment;
• A certified accountant must attest to the entity’s right to the refund.
• The entity must have regular bookkeeping and must not have been convicted of tax evasion by final court decision.

Decision No. 780 of 2019 provides a maximum cap of nine-months (from the date of the submission of the request) for the Tax Authority to conclude its full inspection and issue a final report on the matter of returning the refund amount. In the event that the delay is due to the entity’s default in submitting the supporting documents, the LG is to be subject to renewal or liquidation by the Tax Authority. Once the Authority issues its final report on the remainder of the refund, it must return the LG to the entity within 15 days in the event that the report is in favour of the entity. Otherwise, a taxpayer that fails to present supporting evidence for a refund or turns out to not be entitled for a refund, is subject to the loss of all or part of the value of the LG in settlement to the Tax Authority.   [1] Ministry of Finance Decision No. 779/2019 amending certain provisions of the Executive Regulations of the Value Added Tax Law issued by virtue of Ministry of Finance Decision No. 66/2017, Egyptian Gazette, Issue No. 266 (contd.), 27 November 2019. [2] 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 both the Schedule Tax plus the standard VAT rate of 14%, and Schedule Tax goods and services that are subject to Schedule Tax rates exclusively. [3] Ministry of Finance Decision No. 780/2019 amending certain provisions of the Executive Regulations of the Value Added Tax Law issued by virtue of Ministry of Finance Decision No. 66/2017, Egyptian Gazette, Issue No. 266 (contd.) (a), 27 November 2019.