The Egyptian Finance Minister, Hany Kadry Dimian, has disclosed new details about the Government’s plans for a new VAT system.
At a meeting with managers of tax offices responsible for administering the sales tax, which VAT will replace, Dimian discussed the plans to transition to a VAT system, which he said would be more equitable and more supportive for businesses and investors.
He said a VAT will expand the tax base to include a broader range of goods and services; feature a list of tax-exempt items; and feature a flat rate of tax, replacing sales tax rates that range from 5 to 45 percent.
The main benefit of a VAT system for businesses will be their ability to newly claim credits against tax incurred on inputs. In addition, exports will be zero rated.
He said that Egyptian experts are entirely responsible for preparing the draft legislation. The International Monetary Fund has played a role only in assessing the key elements of the project and its application mechanisms in light of different international experiences, he said.
He said the publication of the draft law will reveal the rate at which VAT will be levied, as well as the goods and services that will be exempt. He indicated that concessions will provided for low-income taxpayers and confirmed that raw food materials will be exempt.
He also disclosed that voluntary VAT registration will be permitted for businesses with an annual turnover of at least EGP50,000 (USD6,550).
Turning to discuss broader reform efforts, he said the Government is committed to lowering the maximum income tax rate to 22.5 percent, down from 30 percent, and lowering tax on capital goods to 5 percent from 10 percent.
Last, the Government will introduce electronic filing for the most significant taxpayers.
Source: Tax News