A ages ago, President Abdel Fattah Al-Sisi issued the VAT Law with a accustomed bulk of 13% on appurtenances and casework for budgetary year (FY) 2016/2017 and 14% for FY 2017/2018. There are assertive exceptions to the rate, as the accouterment and accessories acclimated in the assembly of a article or in accouterment a annual is accountable to 5%. This, however, does not administer on buses and commuter cars.
Cars are amid the appurtenances that are accountable to the VAT of 13% and the table tax. Cars acclimated in alteration bodies on golf courses are accountable to a tax bulk of 10%, while commuter cars with an agent accommodation of up to 1,600cc are accountable to 1%. Cars with an agent accommodation of 1,600cc to 2,000cc, and locally accumulated cars of added than 2,000cc will be accountable to the table tax at a bulk of 15% of the value. Alien commuter cars with an agent accommodation of added than 2,000cc will be accountable to a 30% tax rate.
The law stipulates that a affidavit active by a registered accountant is bare to acquittance the tax or abate it on cars.
The law additionally states that the agent is committed to arising a taxable antithesis back affairs a adequate or accouterment a annual accountable to the tax. The antithesis charge accommodate the name of the client and allotment number, if applicable, while the controlling regulations will actuate the abstracts included in the invoices, according to the law.
A academy blue-blooded “The implications of the value-added tax (VAT) on the automotive sector” was afresh captivated by Daily News Egypt to highlight apropos and questions amid those alive in the area apropos the tax’s contempo appliance in Egypt.
Representatives from Egypt’s tax ascendancy and the automotive area explained the intricacies of VAT’s appliance as able-bodied as their captivation in the development of the VAT Law’s controlling regulations.
The Tax Ascendancy explained that, amid added goods, cars are the luckiest back it comes to the law’s application, because alone trucks and microbuses were impacted, in accession to added parts. As a result, the ascendancy accustomed that companies present the absolute prices of the automobiles in the market.
Those who abounding the academy accommodate Egyptian Tax Ascendancy arch Abdel Moneim Matar, Central Administration of Tax Operations arch Mohamed Shawky, Central Administration for Tax Analysis arch Salah Youssef, Central Administration for Cases Administration arch Ibrahim Abdel Haleem, Central Administration for Registrars Aid arch Mohamed Matar, Analysis Area arch Mohamed Diab, Egyptian Tax Ascendancy media centre arch Nashaat Ibrahim, Mercedes Benz Egypt cyberbanking administrator Mohsen Idris, acknowledged accountant Mahmoud Abdel Samad, Bavarian Auto Group adumbrative and acknowledged accountant Mahmoud Said, BMW cyberbanking adumbrative Magdy Morsy, arch of the non-direct tax administration in PricewaterhouseCoopers–Egypt for cyberbanking consultations Khalid Abo El Yazid.
The academy was chaired by Al-Borsa’s carnality editor-in-chief Hussein Abd Rabo. Al-Borsa’s Mohamed Aboul Fotouh and Ahmed Amer additionally took allotment in the seminar.
Below is an edited archetype of the chat that took abode amid Al-Borsa assembly and assembly from the automotive area apropos VAT’s implementation.
What is the appulse of the VAT Law on the automotive sector? What are the problems the law is adverse in its implementation?
Matar: First, I would like to acknowledge Al-Borsa for allotment such an accident and for giving us the adventitious to acquaint with the area in adjustment to actualize a bigger compassionate of the VAT mechanisms and how it will be implemented.
I would like to agenda that the VAT has not impacted cars in the categories amid 1,600cc and 2,000cc, except in acceding of the adjustment acclimated to annual the tax.
There are two genitalia to the VAT: the aboriginal is a table tax affected according to the class of the car, and the added is a value-added tax of 13%.
The VAT has added the bulk owed on some cars, including trucks and microbuses, as able-bodied as added parts, by 3%, which increases the bulk to 13% afterward a 10% sales tax.
Cars were the luckiest appurtenances in acceding of the VAT’s application, abnormally during the capricious aeon of the law’s application.
The categories alignment amid 1,600cc to 2,000cc and added were accountable to tax ante of 15%, 30%, and 45%. Their chains to taxes changed. Previously, we had a anchored tax from the bulk of bounded or alien products. Now, with the appliance of the law, this tax is burst bottomward into two parts: a table tax and a 13% VAT.
The aim of this is to set a unified bulk for the VAT’s application. The acumen why cars were accountable to the table tax is because the taxes they were accountable to were already college than 13%. In this case, it is advised as community fees, which agency that back a article is imported, community fees are activated to them. This is the foundation on which the tax is calculated.
The table tax on an importer or automated ambassador will be affected through the table tax of the 8% category. This will be added to the car’s value, and is advised the foundation on which the 13% are affected from. Therefore, alone the abacus adjustment has changed, but not the cyberbanking accountability on the costumer or car buyer.
Tax acknowledgment will be absolutely activated on all absolute or aberrant annual inputs.
Direct acknowledgment is accompanying to all antecedent payments on the commodity. However, there are added services, such as freight, operating with third parties and others, provided during the accomplishment process. The tax was not deducted from all the provided services, but the VAT Law now allows including them in the tax’s calculation.
How will the VAT affect bounded manufacturing?
In ablaze of the Sales Tax Act, alien commuter cars were accountable to a 15-45% tax, according to their agent accommodation (cc).
The VAT Law subjected all appurtenances and casework to one tax category, which is 13% during the accustomed budgetary year (FY), and 14% during the aing budgetary year. The legislation fabricated abiding to advance the tax acquirement from commuter cars, and therefore, subjected the aberration in the tax bulk to the table tax alignment from 1-13%. Hence, alien commuter cars are not decidedly impacted by the VAT Law.
The bulk and tax categories activated to the prices of locally bogus cars are the aforementioned as the ones activated to the prices of alien cars, according to the cars’ agent capacity.
The locally bogus artefact will be luckier than the alien one, due to accretion the abject for tax deductions beneath the VAT Law. Companies will be able to abstract the tax from casework provided to them—something that was not accustomed beneath the Sales Tax Law. The costs of casework are not low because best of these companies were renting assembly curve from added companies. The Sales Tax Law did not acquiesce companies to accommodate these costs in the tax’s calculation, so now the costs will decrease. The VAT Law will absolutely appulse locally bogus cars and animate the Egyptian industry.
What about commuter cars and cartage alteration goods?
Abo El Yazid: Alien commuter cars and goods-transporting cartage will be included in a college class than beneath the Sales Tax Law. This FY, the aberration will be 3%, while aing year it will angle at 4%. Hence, prices will be afflicted by the change in rates. The prices of locally bogus accessories will be impacted by the aforementioned access in the tax bulk as the ones that are imported.
By accretion the tax acknowledgment abject on inputs beneath the VAT Law, costs will decrease.
Does the VAT Law accommodate cars with a aggressive advantage?
Matar: Cars are advised the luckiest amid t back because the appliance of the law. The arch of the Central Administration for Tax Analysis [Youssef] can explain this in detail.
Youssef: If there was a b of cars that is accountable to the Sales Tax Law, for instance the 30% category, and the VAT Law was again applied, and the stock’s sales tax was already paid, the sales tax will aboriginal be affected at 30%. The acumen abaft this is that the cars are accountable to the table tax and the VAT. Thus, the table tax is allotment of the VAT base. That’s why we should apperceive the sales tax value. The sales tax on a car that costs EGP 200,000 is agnate to EGP 200,000 assorted by 30%—this is how the sales tax is calculated.
In the capricious provisions, table or sales taxes are deducted from the VAT’s value. For example, if the sales tax in this case is EGP 30,000, and the table tax—which is affected through value, customs, development, and added fees—is EGP 15,000, this bulk will be acclimatized from the paid sales tax. Afterwards that, the VAT will be affected at 13% and deducted from the acclaim balance. Therefore, the merchant will not buck any added costs in this case. There are activated examples of how to administer the tax.
We accept a archetype of the controlling regulations of the VAT Law. How absolute is it?
Youssef: We accept issued several copies of the abstract VAT Law, as able-bodied as copies of the controlling regulations, and I accept that the deployed copies are not final, and are still actuality edited.
Some entities in the automotive area had a botheration with artful the tax, and an absurdity occurred during its appliance with customs.
Youssef: The sales tax has been annulled, and thus, the VAT became the accustomed tax for any development fee, like customs. The fee became allotment of the table tax, and we captivated alive sessions for those ambidextrous with the Community Ascendancy to accomplish them acquainted of the tax’s application.
Matar: The botheration is that the tax’s appliance at community was temporary, because in the Development Fee Law, the sales tax was allotment of the development fee. This afflicted altercation and fabricated the community regulators catechism whether they should annual the sales tax afterwards or afore abacus the development fee.
This botheration was bound in the VAT Law, which declared “all taxes and fees are paid in the community process”.
Youssef: Community fabricated addition aberration by arty a 1% table tax on cars able for disabled people, because them 1,600cc cars. However, these cars are absolved from taxes in the VAT Law.
But I anticipate these cars are still accountable to the table tax, although all the appurtenances exempted by the law do not accept to pay the table tax and VAT.
Are annual and article stocks accountable to the development fee or not? Some companies did not annual the development fee as allotment of the table tax.
Matar: The buyer of the annual has a advertisement of the old stocks, which includes the stocks’ bulk and the tax. It additionally shows whether the tax was paid in customs, and whether the development fee was affected or not.
For example, if the tax was annual EGP 10,000, and again community addressed the aggregation that owns the annual and asked them to pay a assertive value, the adjustment will be affected based on what was absolutely paid, and no new tax will be imposed.
Shawky: The aggregation that owns the annual in this case will abide registered beneath the VAT Law.
The catechism is whether the bulk of the taxes on cars increased, and the acknowledgment is no—it aloof angry into a table tax.
The sixth article of the appear archetype of the law was bright in that regard, and the adjustment will be fabricated on a net acclaim antithesis of the sales tax.
The tax is a acclaim tax, which agency that during auditing the antithesis provided is deducted from the sales tax, and accordingly no amounts are paid until the end of the acclaim balance.
The company’s antithesis is anchored in the Community Authority. Upon its depletion, there will be a table tax that is activated alone to car producers, but the bearings is altered for manufacturers and traders. There is no aberration amid the table tax and the VAT for the manufacturer, and the bulk will alone about-face from a table tax to a VAT in the case of sale.
However, if a banker buys a car with a 30% sales tax, it is disconnected into a 15% table tax and 13% VAT. This agency that the tax fell to about 29% with a acknowledgment on inputs.
Matar: I would like to barrage an action through Daily News Egypt acclamation the companies—if you accept a botheration in the adjustment of the acclaim balance, you charge arch to the assay or ysis area at the Community Ascendancy in adjustment to annual your antithesis properly.
Please explain the acknowledgment of the tax on aberrant inputs. Some community admiral said that the acquirement of computer accessories is deducted from the VAT. Is that correct?
Matar: Aberrant inputs are affiliated to commodities.
Shawky: For assembly centres, all their pay-offs that are accountable to VAT abatement aural the deduction.
Production casework centres are accustomed to abstract inputs and assembly marketing, as able-bodied as business service, administrative, and cyberbanking centres. As continued as they accommodate absolute or aberrant added value, they are deductible. However, this is beneath the action that the VAT is afar from the bulk of the commodity.
Tax allotment submitted by companies are a articulation amid the Community Ascendancy and the company. At the end of anniversary FY, the sales and purchases of the aggregation are authentic in full, but if the tax is included in the ascribe in the table of purchases, the acknowledgment does not booty place.
Youssef: In adjustment to advice the dealers, we will advance a bright ogue of the aberrant inputs in the controlling regulations, and actuate whether they are accustomed and authoritative costs or business and administration expenses.
How would you administer the VAT Law on the appurtenances absolved from taxes according to the all-embracing agreements?
Matar: The VAT Law was clear, as it stipulates that “no changes shall be activated to the exemptions provided beneath the agreements assured amid the Egyptian government and adopted countries, international, or bounded organisations, and petroleum and mining agreements”.
Would the COMESA acceding be accountable to the VAT Law?
Shawky: Yes, COMESA agreements will be accountable to the VAT Law.
What about automotive accommodation companies and the interests of instalment sales?
Shawky: There are two activities absolved from the VAT Law. Beneath Article 33, which deals with cyberbanking transactions, the automotive loans are not accountable to the VAT.
Article 31 of the Central Coffer Law stipulates that the cyberbanking business is absolved from taxes. In applying the accoutrement of Article 31, coffer business shall beggarly any action comprising, basically and habitually, the accepting of deposits, the obtainment of finance, and the advance of these funds in accouterment accounts and acclaim accessories and accidental to the basic of companies, and all that is advised by cyberbanking attitude as coffer business.
Any enactment not registered according to the accoutrement of this law shall be banned from appliance the appellation “bank” or any added announcement agnate to it in any language, whether in its appropriate name, bartering title, or publicity. This agency that clandestine companies are not accountable to this law, accordingly they should annals beneath the VAT.
Article 36 of the Central Coffer Law exempts non-banking cyberbanking casework beneath the administration of the Egyptian Cyberbanking Supervisory Ascendancy (EFSA) from taxes, according to Law No. 10 of 2009 on the organisation and administration of cyberbanking and unspecialised markets and instruments.
According to Article 2 of the law: “EFSA shall be amenable for the administration and adjustment of non-banking cyberbanking markets and instruments including basic market, approaching and derivatives exchanges, allowance activities, mortgage finance, cyberbanking lease, factoring, and securitisation.”
As continued as the automotive loans will be financed from alfresco the cyberbanking area or by companies not accountable to the administration of EFSA, they would be accountable to the VAT.
Would the sales incentives offered by the companies be accountable to the VAT Law?
Shawky: The bartering deductions are acutely mentioned in the law.
Matar: If the bartering deductions are added to the invoice, they would be acceptable.
But these discounts are not included in the invoice.
Matar: The chump should annual from the deductions. If the chump does not annual from them, again they are not advised deductions, because the aggregation can aggregate it and annual from the bulk deduction.
What taxes will be activated on acclimated cars?
Matar: In the case of affairs a acclimated car, a 13% tax will be activated on the aberration amid the bulk of affairs and selling.
Shawky: If the car is acclimated in a assertive bartering activity, which is accountable to taxes and fees, the aggregation has the appropriate to restore the 13% tax, but the agent would not be accustomed to be awash for bristles years.
Let’s booty a attending at a specific example: we accept a b of 100 cars, of which four cars were acclimated by aggregation managers for three or four months. What taxes will be activated if those b cars were to be sold?
Matar: The tax is activated on the car’s recorded antithesis price, and we noticed that a cardinal of car dealers affair invoices with prices beneath the absolute prices.
For example, if a car is annual EGP 180,000, the car banker will affair an antithesis of EGP 150,000 and accord the chump a cancellation of EGP 30,000.
The Chump Protection Agency has accustomed some complaints apropos this issue, and it has been ambidextrous with these cases through the Tax Evasion Control Department.
Shawky: We accept a complaint about a car of which the bazaar bulk registers EGP 480,000, while its antithesis alone annal EGP 250,000.
Matar: In this case, we should acclimatize submitted invoices—a action that is absolutely legal.
Shawky: I anticipate that the aggregation fabricated a mistake, because it believes that this eases the accountability of instalment interests on the customer. I ask the companies to accompany easily with one addition and advertise the authentic affairs prices in the market. This action will assure the bazaar and additionally annual the Tax Authority.
Companies in the automotive bazaar accept aliment affairs with their customers. Will the value-added tax be deducted from these contracts?
Matar: If the aliment assurance is included in the car’s invoice, it will be deducted from the absolute VAT. However, if the aliment assurance is closed on a altered contract, it will not be deducted from the absolute VAT, but will be accountable to the accustomed VAT rate.
Companies and importers in the automotive area are adverse problems with the bulk of the US dollar. How will these problems be addressed during an auditing inspection?
Matar: This affair is added accompanying to the Income Tax Law. The bulk of accepting adopted bill is affected based on the aberration in the currency’s price. I am currently gluttonous to acquisition a band-aid for this bind with the Central Coffer of Egypt, because in adjustment for the Tax Ascendancy to recognise the differences, we charge to accept bills.
We are currently belief the admittance of the bill obtainment bulk as allotment of the costs that do not accept to be accurate through documents. The accustomed bulk of such costs lies at 7%. In the VAT Law, there is no problem.
How will this apparatus be applied?
Matar: There is a collective board amid the Ministry of Accounts and the Central Coffer of Egypt, to which we appropriate this procedure.
During the discussion, you said that the controlling regulations of the law should be issued aural 30 days. The accessories of the law agree that the abbot of accounts should affair the law’s controlling regulations aural 30 canicule from the date it was appear in the official newspaper. It additionally states that until these regulations are set, the law will abide to be implemented according to accustomed regulations and decisions, unless they are adverse with the law.
What I absolutely admiration about is if the controlling regulations anticipate the appliance of the law or authorize altitude that are not allotment of the law? The acknowledgment is no, and therefore, the law is accurate and should be applied.
I accept that hasty the arising of the controlling regulations may not be advantageous because it would advance to not demography important credibility into account. Demography time to abstract the controlling regulations guarantees their accuracy and clarity, and does not crave that added instructions be issued after on. Thus, demography our time is bigger than hasty the process.
I will booty the above credibility aloft by the assembly of the automotive area in this appointment into application back drafting the controlling regulations of the law. I will be abiding to accommodate absolute solutions in the controlling regulations to abate disagreements and conflicts.
Will the law be activated on the exported services?
Abu Al Yazid: There charge be a bright and absolute ogue of “exported services” in the controlling regulations of the VAT Law.
How is the accountant affidavit applied?
Matar: The affidavit charge be issued by a acknowledged accountant back deducting or refunding the tax. The affidavit and its exact anatomy will be set in the controlling regulations.
Will car casework like Uber and Careem be accountable to the VAT?
Matar: These casework will be accountable to the accustomed tax bulk of 13%.
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