Google has notified its users of imposing a 14 percent value-added tax on its electronic services in Egypt, starting July, in implementation of the Ministry of Finance’s decision to subject non-resident service providers to value-added tax.
An official estimated that this tax would garner more than US$64 million in the first year, and rise gradually over the coming years.
Finance Minister Mohamed Maait announced, in January, amendments to the executive regulations of the value-added tax law, to subject e-commerce transactions to tax through a simplified system, in accordance with international standards and requirements of foreign companies.
Google will start collecting value-added tax on the electronic services it provides to people in Egypt who are not registered for taxation, in accordance with the Ministry of Finance’s recent amendments to the executive regulations of the value-added tax law to subject non-resident companies or persons to a 14 percent value-added tax, the advisor to the head of the Egyptian Tax Authority Saeed Fouad said.
The tax is imposed on services or goods provided to beneficiaries in Egypt who are not registered with the tax authority system, he added.
Egypt aims to collect tax revenues worth LE1.5 trillion ($49.5 billion) during the fiscal year 2023/2024, which begins in early July.
Through collecting tax on e-commerce, Egypt counts on the continued expansion of the tax community, improving the services provided to taxpayers, applying the tax law on free professions and the expansion of registration of self-employed persons to broaden the tax base.
Fouad explained, in exclusive statements to CNN Arabic, that the VAT law requires companies abroad to pay a VAT of 14 percent for the services or goods it provides to beneficiaries inside the country.
The law requires non-resident companies to collect this tax and import it to Egypt, according to an international cooperation protocol, he added.
Egypt joins Organization for Economic Cooperation and Development agreement
Egypt has joined the Organization for Economic Cooperation and Development agreement, to which 136 countries are subscribed.
The agreement obliges multinational companies to pay a fair share of taxes wherever they operate and generate profits in various countries of the world.
According to an official statement, the agreement contributes to ensuring the redistribution of about $125 billion in profits of major technological companies to other countries according to specific rules, so that each country gets its fair share of the tax on profits, in addition to imposing a minimum tax rate of 15 percent on multinational companies.
e-Platforms, whether specialized in providing marketing services, paid viewing, trade, accounting, tax and legal consulting, or e- games, are obligated to collect a VAT from subscribers and supply it to Egypt, Fouad said.
Some services are not subject to value-added tax such as hotel reservation services, or airline ticket reservation because the service provider already pays the value added tax in Egypt.
Egypt’s general budget estimates proceeds from value-added tax during the new fiscal year 2023/2024 at LE575.4 billion ($18.6 billion), an increase of 20.5 percent over the current fiscal year.
Fouad stated that the value-added tax will be applied to non-resident companies in Egypt, starting from the next fiscal year, after approving simplified amendments to the executive regulations of the law to facilitate tax collection, and signing a global tax agreement on multinational companies to ensure tax collection.
The value-added tax on services and e-commerce will collect LE two billion ($64.8 million) during the next fiscal year, Fouad estimated, assuming that these proceeds double annually due to the increase in reliance on e-commerce on a large scale after the coronavirus pandemic.
He noted that the Ministry of Finance allowed companies to import the VAT collected in foreign currency.
