Egypt - Guidance issued on VAT treatment of a supply of digital services

08 September 2023

Egypt’s tax authorities have issued guidance on the VAT treatment of digital services and other services provided remotely by nonresidents to persons in Egypt. The guidance, which applies as from 22 March 2023, outlines the VAT obligations of nonresident suppliers that provide digital services via websites, social media stores and other applications, and also covers invoicing and record-keeping requirements, tax refunds, etc.

A nonresident supplier of digital and remote services to Egyptian customers is required to register, charge and collect VAT that applies on sales to consumers. Remote services are services where there is no necessary connection between the physical location of the recipient and the place of physical performance. Examples include supplies of digital content, online supplies of games, software, website design and publishing services, as well as legal, accounting and consultancy services.

Different rules apply depending on whether the recipient of the services is a VAT-registered taxpayer or not. In a B2B supply, the recipient is required to account for and remit VAT to the Egyptian tax authorities under the reverse charge mechanism. The VAT obligations relating to B2C supplies depends on whether the digital services are provided through the nonresident seller's own portal or app or through an electronic distribution platform.

Nonresident suppliers must register for VAT purposes under a simplified regime, and once registered, the nonresident can file simplified VAT returns. Such nonresidents may not deduct input VAT, but they can apply for a refund to recover any input VAT they have incurred in Egypt in connection with their taxable activity.

Affected taxpayers should be familiar with the guidelines and comply with the rules to avoid penalties.

Mostafa Makram
BDO in Egypt