“Egypt’s digital transformation and the updating taking place at the Egyptian Tax Authority [ETA] are facilitating the submission of tax returns and other operations,” said Al-Sayed Mahmoud Sakr, head of administrative affairs for the ETA.
The changes, to be in place next January, will see digital procedures introduced for “large and medium-sized taxpayers and large private businesses. These will include registration, the submission of tax returns, and e-payments,” he said.
A further 16 operations comprising 64 procedures are to be digitised as well, Sakr said. “The e-billing system will allow taxpayers to be more closely monitored, and larger taxpayers are already using the new system. Smaller ones will gradually follow,” he added.
Legislative amendments were required for the ETA to develop its procedures. Law 206/2020, a unified tax procedures law, was issued in 2020, and the existing income tax law was amended, along with the value-added tax law originally issued in 2016, Sakr said.
The ETA is creating a unified system that will allow taxpayers to have one file, one tax number, and to finalise all procedures in one place, he explained.
Other developments focus on upgrading the authority’s facilities, buildings, and infrastructure. “These will reflect positively on the confidence between the authority and taxpayers. Tax returns and e-invoices can be submitted online, reducing physical interactions between ETA employees and taxpayers,” he added.
Sakr said that e-billing allowed the ETA to follow up on commercial transactions between companies by receiving data in real time in digital format. “This system will help in the digital registration of commercial transactions, verifying the source, recipient, and content of bills,” he said.
It will help to “eliminate the parallel market and informal economy, achieving equality between companies operating in the Egyptian market and facilitating and speeding up tax procedures,” he added.
The e-receipt scheme is “based on a central electronic system that enables the ETA to follow up on commercial transactions of goods and services between sellers and consumers in real time through the electronic communication of ETA systems and the points of service of vendors and service-providers.”
This “will help integrate the informal sector into the formal economy, reduce tax evasion, enforce tax justice, provide equal opportunities for all those operating in the Egyptian market, and collect money due to the state,” Sakr said.
E-receipts also provide taxpayers with advantages such as “facilitating tax examination procedures, decreasing the number of visits that may be necessary to the ETA, examining sales receipts electronically, and easing the preparation and submission of tax returns.
“There will be no need to provide sales receipt data if they are stored in a central database at the ETA. This will protect consumers’ rights and ensure that they receive a good service, while facilitating the return of goods that do not conform to market specifications.”
Mohamed Kishk, director of oversight of larger taxpayers at the ETA, said that the application of the e-invoice system was taking place gradually and that taxpayers could join it for free. The first phase was launched in mid-November 2020 and had been extended to cover 134 companies registered as larger taxpayers.
A second phase was implemented on 15 February this year, involving a further 347 companies. The third phase began on 15 May, encompassing all other companies registered as larger taxpayers.
Law 195/2021 makes it mandatory for companies registered as medium-sized taxpayers in Cairo and as larger taxpayers in Nasr City to issue e-invoices for the goods they sell. The law will go into effect on 15 September.
Alaa Al-Saqti, head of the Small and Medium-Sized Enterprises (SMEs) Federation, lauded the Ministry of Finance’s efforts to update the tax system, explaining that the recent medium-sized, small, and micro enterprises law simplifies tax matters for such businesses and encourages SMEs to increase their operational capacities and production.
According to the law, companies making profits of between LE1 million and LE2 million are taxed at 0.5 per cent, of between LE2 million and LE3 million at 0.75 per cent, and of between LE3 million and LE10 million at one per cent over five years, Al-Saqti said.
As well as reducing the need for physical interaction, the e-tax system also decreases possible human error, he added.
*A version of this article appears in print in the 19 August, 2021 edition of Al-Ahram Weekly