Tax Authority identifies over 800 potential VAT payers on digital services

On October 30, 2024, Global VAT Compliance was informed that the Egyptian Tax Authority (ETA) has identified over 800 potential taxpayers for value-added tax (VAT) on digital and remote services provided to consumers within Egypt.

The ETA has analysed companies operating in the digital sector and gathered preliminary data identifying potential taxpayers. This effort has resulted in the compilation of three separate files containing the names and email addresses of over 800 companies believed to be offering digital services to Egyptian consumers.

Remote services performed by non-resident suppliers have been taxable in Egypt since 22 June 2023. The registration threshold for remote services is generally EGP 500,000 for any 12-month period, but for services subject to the reduced VAT rate, the threshold is nil. Non-compliant taxpayers may face penalties, including a risk review (audit), registration for VAT, assessment of liability, additional penalties, and a ban on selling in Egypt.

The scope of remote services that are subject to VAT includes digital content such as e-books, movies, TV shows, music, online newspaper subscriptions, website design or publishing services, online supplies of games, apps, software, software maintenance, and legal, accounting, or consultancy services. However, “on-the-spot” services, which require the physical presence of a customer in a specific location to receive the service, are excluded.

Remote services are generally subject to the standard VAT rate of 14%, unless they fall under the reduced VAT rate of 10% or are explicitly exempted. Business-to-business (B2B) sales are exempt from VAT, and the customer is required to self-assess and remit the tax to the tax authority.

An additional development in Egypt is that, as of 1 November 2024, online sellers need to validate Tax IDs of B2B customers.

Introduction of new validation requirements

Companies in Egypt must verify the Tax Registration Number (TRN) and Unique Identification Number (UIN) of their B2B clients to correctly apply the reverse charge VAT mechanism.

API access process

The ETA has introduced an API access process to facilitate compliance. Vendors can obtain the necessary credentials directly from the ETA, and access to the API verification system is required for compliance.

Guidance on UIN acquisition and management

The ETA provides comprehensive guidance for local businesses on obtaining UINs. These identifiers are valid for one year and must be revalidated regularly.

Failure to validate TRN and UIN pairs will result in transactions being classified as B2C, subjecting them to a 14% VAT charge and potential penalties for non-compliance. Global VAT Compliance will continue to monitor the situation and provide updates as the ETA’s efforts progress.