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Unified Tax Procedures Law introduced by Egypt

Unified Tax Procedures Law introduced by Egypt

Law No. 206 of 2020 was published in Egypt’s Official Gazette on 19th October 2020 which introduced consolidated tax procedures for the assessment and collection of tax. These are applicable for income tax, stamp tax, state development tax, value-added tax and any other taxes of the same kind.  The applicability of this Law extends to those procedures that were unfinished or partially complete before 20th October 2020.

The primary aim of the new Law is to amalgamate the various tax procedures that are of a similar nature and to institute a more digitally compliant tax system in line with the ever so dynamic modern economy. The significant changes that are brought to attention by this legislation are enumerated below:

  1. All provisions regarding tax procedures present in existing laws are null and void.
  2. Electronic signatures are to have the same legality and validity as written signatures.
  3. The rights and responsibilities of the Egyptian Tax Authority (ETA), as well as the taxpayer, are stated in the Law.
  4. In every tax correspondence and transaction, the taxpayer must include a unified tax registration number.

The salient features of the Unified Tax Procedures Law are as follows:

  1. Taxpayers have to submit their tax returns through the authorized electronic system along with an e-signature. A usage fee will also be charged for the process.
  2. Monthly VAT returns are to be submitted within a month following the end of the tax period as opposed to the earlier deadline of two months.
  3. Quarterly returns for salary taxes must be submitted by all businesses in January, April, July, and October every year. Such returns shall encompass the details of the employees, total gross salaries and other taxable compensations so paid.
  4. The right to submit an amended tax return is given to every taxpayer during the year following the due date that is established for submitting the annual return.
  5. Legal persons involved in commercial or financial transactions with related parties must provide various documents with respect to the pricing of such transactions to the Egyptian Tax Authority (ETA). Primarily three documents are to be submitted- the Master file, which consists of information on all the members, the Local File, which provides details on the transactions of the local taxpayer, and the Country-by-Country Report, that includes the financial information of all associated persons.
  6. The master file and the local file must be prepared and submitted by the taxpayer if the aggregate of its related party transactions is beyond EGP 8 million for a year.
  7. A penalty for non-compliance with the transfer pricing regulations has been introduced. 1% of the total value of the related party transactions that have not been declared in the corporate income tax return of the taxpayer is to be paid towards penalty for non-compliance as stipulated by the Law.

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