Electronic Invoicing
As Egypt’s aim to move towards digital transformation and the desire of developing the taxation system, the Egyptian Minister of Finance had enacted a decree on 26th of March 2020, introducing the electronic tax invoice system (E-invoice System) and obligated all the natural persons and/or juridical persons to register in the Egyptian tax system to issue electronic invoices that include their electronic signature and the unified code for the provided product or service.
The E-invoice System is considered a central system to enable the Egyptian Tax Authority (ETA) to follow-up on all commercial transactions between all registered companies and taxpayers; in order to improve fiscal control and reduce tax evasion. The E-invoice System is covering the business to business (B2B) companies, with the aim of expansion to cover businesses to consumers (B2C) in the future.
Through the application of the E-invoice System, the paper-based invoices shall no longer be accepted by ETA and shall no longer be used as a proof for costs and expenses incurred by the registered companies and taxpayers.
Purpose and benefits of the E-Invoice System
In light to improve fiscal control and reducing the tax evasion, the ETA proposed the E-invoice System’s project for main following objective and benefits:
- Digital transformation of commercial transactions and dealing with the latest technical methods in verifying the provided information and data;
- Eliminate the parallel or the underground and informal economic markets;
- Achieving the principle of equity of opportunities and justice among taxpayers in the Egyptian market;
- Detecting the fictitious transactions;
- Facilitating and accelerating tax and invoice submitting procedures;
- Facilitating the process of submitting the tax returns.
Obligated persons
According to the provisions of Article No. (35) of the Unified Tax Law issued by Law No. 206 of 2020, “Companies and other legal and natural persons specified by the executive regulations of this law who sell a good or provide a service must register all their purchases and sales from goods and services on the electronic system, the executive regulations of this law specify its technical specifications and standards, and the controls and provisions for in a way that ensures that the ETA can permanently track the movement of sales, determine their size and value, the parties, and other matters necessary to assess and collect the prescribed tax”.
The Article No. (34) of the Executive Regulations of the Unified Tax Law issued pursuant to Minister of Finance’s resolution No. 286 of 2021 came in implementation of the provision of Article No. (35) of the Unified Tax Law mentioned above, stating that this obligation is imposed on companies and others of legal and natural persons who sell a good or provide a service, whether producers, traders, distributors, service providers, exporters, importers, or distribution agents.
Legal Penalties
Article No. (71) of the Unified Tax Law stipulated that “anyone who violates the provisions of Articles (24, 28, 35/1 and 2, 37/1 and 4, 38/1, 2, and 3) of this law shall be punished with a fine of not less than twenty thousand pounds and not exceeding one hundred thousand pounds”.
The provision of this Article indicates that in case of violating the obligation of the obligated persons to register their sales and purchases, a fine of an amount not less than EGP 20,000 (Twenty Thousand Egyptian Pounds) and not exceeding EGP 100,000 (One Hundred Thousand Egyptian Pounds) shall be imposed on the violated person.
Finally, such regulation aims to support the growth of the digital economy; where the country intended to implement E-invoice System in stages to enhance the efficiency of the tax system management in line with the Egypt’s plan to focus on strengthening the digital services infrastructure and digitalizing the tax administration.