Egypt prepares VAT implementation legislation

The Cabinet is expected to review and issue new legislation in March for the introduction of VAT to Egypt. The implementation date is expected to be January 2016.

Egypt currently operates a complex and inefficient Sales Tax regime, with rates varying from between 5% and 45%. There are limited opportunities for the deduction of Sales Tax incurred by businesses through the production chain leading to a heavy cumulative tax burden. In particular, this is hampering the development of the manufacturing sector which Egypt views as important for its future economic well being. Regional competitors to Egypt, such as Turkey, have shown how a fully functional VAT regime, along OECD guidelines, can boost growth in job-creating industries.

It is not yet clear what standard VAT rate will be introduced. The rate will possibly be between 12% and 15%. The new tax will be levied on most goods and services, although there will be reduced rates or exemptions for basic foodstuffs, public transport, domestic fuel supplies and other essentials.

A VAT registration will be set to exclude the smallest of traders from the administrative burden.