Businesses In Egypt To Remit VAT In Foreign Currency. Businesses in Egypt will now have to remit the value-added tax (VAT) they owe on goods and services sold, in the same foreign currency in which they have been paid.
The Finance Ministry introduced the new requirement as the treasury struggles with an abiding foreign currency shortage.
The decision is a revision to the executive regulations of the unified tax procedures law and was published in the Official Gazette on Wednesday. It took effect last week.
The way things work now is that, with the exemption of the export sector which is excluded from VAT, companies are allowed to make a foreign currency deposit in a government bank commensurate to the sum owed in VAT for that particular month, in which case they can remit the value-added tax (VAT) itself in Egyptian pounds.
Industry figures expect the new rule to affect some companies, especially those working in the tourism sector.
Businesses In Egypt To Remit VAT In Foreign Currency: Background
Prior to the amendment, companies were urged to calculate their profits from sales in Egyptian pounds — even if they carry out transactions in other currencies — and pay VAT accordingly.
According to a former high-ranking Egyptian Tax Authority official, a legal opinion issued by the State Council around 20 years ago stated that a tax base should be calculated in local currency.
The council’s opinion was formed on the basis that remitting taxes in local currency is a basic aspect of state sovereignty.
The source mentioned that although there was the option to remit tax in foreign currency, common practice decreed that the tax base should have first been calculated in Egyptian pounds.
It was further stated that though the amendment is not in accordance with the State Council’s precedent, it won’t stop things from proceeding accordingly unless someone takes legal action against the ministry at the administrative court.
The Effects Of The Amendment On The Tourism Sector
According to Hossam Hazzaa, a member of the Egyptian Tourism Federation, the amendment will have certain effects on the tourism sector.
Tourism companies such as agencies organizing Hajj and Umrah trips, who need to make payments outside of Egypt, might not have sufficient foreign currency to make their payments now that they also have to remit VAT in foreign currency.
Hazzaa mentioned that existing restrictions on the availability of foreign currency and its use in digital transactions abroad place much inconvenience on the tourism sector.
The Central Bank has set a limit of $250 per month in digital payments abroad, which obviously is not enough for the needs of any tourism company, he added.
He continued that having to remit VAT in foreign currency under the same restrictions on using foreign currency will deny tourism companies a resource they depend on to settle their payments.
Follow us on Twitter for more update
The information contained herein is general and is not intended, and should not be taken, as legal, accounting or tax advice provided by Taxmobile.Online Inc to the reader. This information remains strictly the opinion of Taxmobile.Online Inc.
The reader also is cautioned that this material may not apply to, or suitable for, the reader’s specific circumstances or needs, and may require consideration of other tax factors if any action is to be contemplated. The reader should contact his or her Tax Advisers before taking any action based on this information.
All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Taxmobile.Online Inc.