New guideline on the implementation of Reverse Charge Mechanism

On 27 November 2023, the Egyptian Tax Authority (ETA) released a guideline on the retroactive implementation of the Reverse Charge Mechanism (RCM) concerning imported services. 

Key points of the tax guideline: 

1. Mandatory registration: Companies that are not registered for Value Added Tax (VAT), even if their activities are tax-exempt, are now obligated to register for VAT when engaging in import services transactions. This requirement applies irrespective of whether they meet the standard VAT registration thresholds (e.g., VAT registration threshold of EGP 500k).
2. Non-compliance consequences: The guideline specifies that companies failing to register for reverse charge purposes or neglecting to declare transactions related to imported services, irrespective of their exempt status, will be treated as engaging in tax evasion. Penalties outlined in the VAT law will be enforced for non-compliance.

It is crucial for businesses to promptly review their current practices to ensure compliance with these updated regulations. Our experienced tax team is ready to support you in navigating these changes.