Get ready for the new e-invoicing requirements in Egypt

The global pandemic has provided the world’s organisations with a vast array of challenges, but it has also prompted accelerated investment in digital transformation initiatives.

One prominent example is the increasing focus on e-invoicing, which refers to the automated digital processing of invoices between buyers and suppliers.

New requirements are now being considered by a number of tax authorities across the Middle East and Africa, with Egypt already introducing mandatory e-invoicing.

Outlining the e-invoicing journey in Egypt

In March 2020, the Egyptian Ministry of Finance published Decree No.188 in the Official Gazette to outline its stages for implementing e-invoicing.

Decree No.125 followed on 8 March 2021, stating that from January 2022, businesses will not be able to deduct a VAT input tax credit on a paper tax invoice, unless the tax invoice is issued by a VAT payer that’s not yet required to apply e-invoicing at the time of supply.

According to the new regulation, taxpayers are therefore obliged to begin issuing e-invoices that contain the issuer’s electronic signature and a unified code for each sold good or rendered service, all of which must be authorised by the Head of the Egyptian Tax Authority. In full, electronic invoices should include:

• Invoice number, the issuance date, tax amount and the total amount due
• Supplier’s name, address and tax registration number (if any)
• Buyer’s name, address and tax registration number (if any)
• Description of the goods sold or service provided
• The unified code of the goods or services, as determined under the Unified Standard Code issued by the tax authority
• If the invoice is issued in a foreign currency, it should include the exchange rate as announced by the Central Bank of Egypt on the issuance date of the invoice
• The business code of the company and the code of the branch issuing the invoice.

The first phase included 134 large companies that were selected to comply with the new regulation, starting from 15 February 2021. The second phase was extended to include another 347 large companies, with the Ministry of Finance announcing that all large companies were required to comply before 1 July 2021. Those that hadn’t done so by this date would be banned from doing business with public bodies, such as ministries and state agencies.

The subsequent Ministerial Decree published on 18 November 2021 stated that the sixth phase of e-invoicing implementation requires all companies registered with the Egyptian Tax Authority for the Joint Stock Companies and the Tax Authority for Investment, regardless of their size, to issue their invoices electronically from 15 February 2022.

Companies were also asked to start integrating their ERP systems with the tax authority portal from the date the Ministerial Decree first came into force (18 November 2021). They can do so by following the below steps:

• Registering their digital profile
• Getting credentials for API access to the portal during the registration process
• Getting, and registering, an eSeal certificate from one of the official certification service providers in Egypt
• Logging in and getting an access token.

The benefits of e-invoicing

While transitioning to the new rules provides a short-term headache for companies operating in Egypt, e-invoicing ultimately unlocks a host of long-term benefits.

When properly implemented, e-invoicing reduces the chance of human error while improving security through encrypted exchanges between parties. It also enables faster, more efficient processing compared with paper invoices, as well as lower costs. It becomes easier to track invoices and results in increased user and customer satisfaction.

It will also reduce ‘shadow economy’ activity, thought to account for 40-60% of economic activity in Egypt, by introducing greater transparency and giving the government closer control over tax collection.

The risks of non-compliance

It’s crucial for businesses operating in Egypt to start monitoring their own compliance, if they aren’t already doing so, as well as the compliance of their suppliers with the new e-invoicing rules. If they don’t, they risk losing VAT input tax credits.

Furthermore, all of the regulations related to tax invoices, as mentioned in Egypt VAT regulations, will be applicable to e-invoices. Article 67 of the VAT Law states that “a taxpayer’s failure to issue tax invoices concerning the sales of commodities or services as mentioned in Article 38 of the Executive Regulations to VAT Law will be deemed a tax evasion.” The stipulated punishment is “an imprisonment term of no less than three years and no more than five years and/or a fine of not less than E£5,000 and not exceeding E£50,000.”

Talk to TMF Group

We provide a full range of services across the Middle East and Africa that enables our clients to invest, operate and grow internationally.

Our team of accounting and tax experts can help you to prepare your business for the new e-invoicing rules and assist with all ongoing compliance obligations. To find out more, get in touch today.