Egypt: New VAT rules on exported services

The Egyptian tax authorities issued Instructions No. 78 amending the basis for applying the 0% value added tax (VAT) on exported services effective November 17, 2024. 

Under Circulars (5) and (6) of 2019, services were considered exported services subject to 0% VAT if the benefit of the services was received outside of Egypt. As a consequence, services such as marketing, whose benefit was received in Egypt were subject to VAT at the standard rate of 14%. 

Instruction No. 78 repeals Circulars (5) and (6) and clarifies that services are considered as exported services subject to 0% VAT if the recipient of the services is abroad and no longer if the benefit of the services is abroad. Such services are considered exported services if the following documents are available:

• A signed service agreement between the service provider in Egypt and the service recipient abroad
• An electronic tax invoice issued by the service provider in Egypt, containing all legally required information, such as the service provider's details (tax ID number, address, etc.), type of service provided, value of the service, and the name of the recipient abroad, etc.
• A bank transfer from abroad to a bank subject to the supervision of the Central Bank of Egypt must be provided, indicating the payment for the exported service

Business with operations in Egypt that have applied VAT on cross-border services because the benefit was considered received in Egypt need to review the taxability of these transactions and determine whether they can avail themselves of the expanded zero-rating. Businesses need to setup processes and procedures to ensure that they collect and keep all required documents supporting the new zero-rating.

Read a November 2024 report (Arabic and English) prepared by the KPMG member firm in Egypt

Philippe Stephanny | philippestephanny@kpmg.com