The newly introduced Electronic Invoicing (e-invoice) system has become mandatory in Egypt for all businesses (corporate or SMEs) and taxpayers as part of the state’s strategy for automating tax compliance and modernizing the tax administration system. The Egyptian Tax Authority (ETA) hopes that widely implementing the e-invoicing system will give the state a better grasp on treasury documentation in efforts to help eliminate the parallel/informal economy.
Newly introduced tax law benefits businesses and the tax system
Under the Unified Tax Procedures Law No. 206 of 2020, the ETA aims to unify procedures for different tax categories of a similar nature (income tax, value-added tax (VAT), stamp tax, state development duty) and to establish the legal basis to transform tax procedures into the new e-tax system. The e-invoicing system was launched over two stages; the first was in November, 2020 and the second in February, 2021. Introducing and implementing the e-invoicing system brings many benefits to companies and taxpayers:
- It enhances their tax positions by classifying them among companies with low tax risks.
- It facilitates settlement procedures between companies with regard to value-added tax.
- It updates the method of exchanging invoices between companies.
The new system also reduces the administrative burden through decreasing the cost of transactions, gradually dispensing with paper-based archiving of invoices, simplifying corporate examination procedures with the possibility of “remote inspection”, facilitating “tax refund” procedures, as well as facilitating the process of preparing and submitting returns, and ending traditional red-tape procedures with companies to fulfill the bills.
How businesses/taxpayers can join the e-invoice system
Some of the basic conditions of joining the electronic invoice system for all stages are:
- The issuance of the e-signature to enable each company to issue e-invoices before being approved by the tax system. Accordingly, the buyer can deduct invoices in his monthly declaration. The e-signature is considered a substitute for the live signature of the paper bill.
- Companies and/or legal and natural persons selling a product or providing a service should register all their purchases and sales on the ETA’s e-system.
- Taxpayers must include a unified tax registration number on all correspondences and transactions.
Penalties under Unified Tax Law pertaining to e-invoice
The ETA indicated that as of July 1, 2021, joining the e-invoice system will be mandatory for all companies & taxpayers and become a condition for companies to deal with ministries, economic authorities, public sector companies, the public business sector, and all offices and state interests. It added that businesses that are not committed to joining the electronic invoice system will be referred to the prosecution.
In summation, the new e-invoicing system establishes a central system that enables the tax authority to follow up on all commercial dealings between companies instantaneously in a digital format. It also facilitates, for both companies and taxpayers, the application process for tax returns and tax refunds in an automated manner that eliminates traditional paperwork and bookkeeping.
It’s noteworthy that all details on how to issue and join the e-invoice system are available on the ETA’s website: eta.gov.eg.
**Leverage is dedicated to being the central partner for businesses to stay compliant as per tax laws. Our experts and advisors will walk you through all procedures to know how to issue an e-invoice and obtain the e-signature. We will manage and handle your tax returns on a monthly, quarterly, and yearly basis to guarantee your company’s compliance.