The international nature of e-commerce allows global enterprises to conduct their activities online without requiring physical presence in other countries. This reality deprives developing countries of potential tax revenues that would have been collected from branches and foreign entities operating within their territories under traditional commerce frameworks.

To address this issue, the Egyptian Tax Authority introduced a Simplified Registration System for non-resident suppliers under Law No. 3 of 2022, aiming to ensure the collection and remittance of Value Added Tax (VAT) from the final consumer in Egypt. This system also seeks to protect local service providers from unfair competition posed by foreign, non-resident counterparts.

 

Simplified Registration System

This system allows non-resident suppliers to register in Egypt in a streamlined manner as outlined by Law No. 3 of 2022 and its executive regulations. It applies specifically to transactions between non-resident suppliers and Egyptian consumers for imported services.

Imported Service

An imported service refers to any service provided by an individual or entity from outside Egypt to a recipient inside Egypt—whether an individual or a company. This includes digital services, regardless of whether the provider is:

• A non-resident without a permanent establishment in Egypt, or
• A resident in Egypt offering the service from abroad.

Non-Resident Supplier

A non-resident supplier is any individual or legal entity that does not reside in Egypt but is obligated to register for VAT and account for it when selling or providing services to non-registered customers in Egypt.

Registration Requirements

Under the Simplified Supplier Registration System, non-resident suppliers must:

• Complete the electronic registration form.
• Comply with the guidelines issued in Ministerial Decree No. 160 of 2023, regarding VAT on digital and remote services provided by non-residents.
• Note that registration became mandatory starting June 22, 2023.

Only paid services provided to the Egyptian market from abroad are subject to VAT under this system. Free services (those offered without charge) are not taxable.

VAT on Digital Services

• Services subject to 14% VAT:
• Online advertising
• Cloud services and email tools
• Digital content: e-books, music, images, videos
• Software licensing, maintenance of intangible assets, and related services
• Data or information provision: newspaper subscriptions, forex trading, etc.
• Digital streaming: movies, TV shows, etc.
• Online gaming
• Services subject to 10% VAT:
• Legal services, accounting, consultancies. etc.
• Professional certifications and freelancer services, etc.
• Exempt services:
• Training, education, and health services (except for cosmetic and physiotherapy services).
• The Egyptian taxpayer must provide the supplier with:
• If the Non-Resident Supplier Is Registered:
• Their VAT registration number, and
• Their Unique Identification Number (UIN)

This allows the non-resident supplier to verify the customer's tax identity and issue an invoice without VAT (since the service is not taxable for a registered business under reverse charge).

• If the Non-Resident Supplier Is Not Registered:

The Egyptian taxpayer must:

• Request the supplier’s trade name and VAT registration number to be included on the invoice.
• Declare and pay the VAT themselves using the reverse charge mechanism:
  • If the taxpayer is not registered for VAT: they must file Form 111 VAT
  • If the taxpayer is registered for VAT: the due VAT is declared under sales adjustments in the monthly VAT return.

In this case, the taxpayer can also deduct the VAT as input tax, provided:

• The imported service is necessary for their business activity.
• The VAT is legally deductible under Egyptian VAT regulations.

Conclusion

As digital transformation accelerates, applying Value Added Tax (VAT) to digital transactions is crucial for tax fairness and compliance. Egypt's simplified registration system for non-resident suppliers aims to streamline tax registration for companies and platforms offering digital services, enhancing transparency and ensuring efficient tax collection.