Egypt: Egypt's Tax Landscape Redefined: The Significance Of Law No. 30

In August of 2023, the tax appeal committees issued a decision to apply Article No. 3 of Law 30 of 2023 to one of the tax dispute cases at the Egyptian Tax Authority. Thus, the dispute was resolved, and the tax was calculated according to the mechanisms established by Law 152 of 2020, marking the first instance of its kind.

In the ever-evolving landscape of taxation, the year 2023 has brought about significant changes with the enactment of Law No. 30. This legislation, primarily through its third article, introduces substantial amendments aimed at creating an alternative legal framework. This framework's primary objectives are to enhance accountability and streamline the resolution of tax disputes, focusing particularly on taxpayers with annual sales below ten million pounds. These taxpayers typically operate within the relative or final tax system, as defined in Articles No. 93 and 94 of the Small, Medium, and Micro Enterprise Development Law (Law No. 152 of 2020).

Effective from June 16, 2023, this legal framework applies comprehensively, with the exception of final
tax liabilities from previous tax periods.

In alignment with the regulatory authority's overarching goal to establish robust controls and procedures for the effective implementation of this article, several key points have been highlighted:

• Clarified Tax Terminology: Significant refinements have been made to tax terminology, with a particular focus on explaining the concept of "non-final tax." Non-final taxes encompass levies that have not undergone the entire appeals process, including cases that are pending or awaiting adjudication at the Tax Office, or are at various stages of dispute examination and related disputes
• Inclusive Scope: Article Three extends its applicability to various entities, including commercial and industrial enterprises, professional and non-commercial activities now recognized as small-scale ventures, and the realm of real estate wealth (excluding real estate transactions).
• Coordinated Implementation: Competent authorities collaborate seamlessly to ensure the efficient operation of the mechanisms outlined in Article Three. These authorities include tax offices, proficient tax centers, internal committees, the anti-tax evasion sector, tax appeal committees, and bodies dedicated to tax dispute resolution.
• Definition of "Annual Turnover": A precise definition has been established for "annual turnover" as the value of annual sales or revenues after deducting revenues subject to distinct categories. These categories encompass dividends, capital gains from registered securities, and returns from treasury bills and bonds. The condition is that the annual turnover does not exceed ten million pounds during the designated tax period.
• Structured Tax Rates for SMEs: The legislation prescribes a structured tax rate framework tailored for small and medium-sized enterprises (SMEs). These tax rates, previously detailed in Articles No. 93 and 94 of Law No. 152 of 2020, are intricately linked to annual turnover.

Methodology for Determining Annual Turnover:

Clear criteria have been established for determining annual turnover. This includes the scrutiny of tax returns submitted by both natural and legal entities, access to data and information at the regulatory authority's disposal, examination of sales/value-added tax returns, and reliance on the most recent business number or tax assessment in instances where tax returns are absent.

Procedural Guidelines:

Entities entrusted with executing this legislative mandate must adhere to procedural guidelines. These include methodical tax assessment, ensuring accurate tax assessment in accordance with the provisions of Article Three.

Particular consideration should be given to the exclusion of revenue streams such as salary-related earnings, especially pertinent for natural persons.

Systematic Tax Adjustments:

In cases where the tax calculation under this article falls short of the declared tax, a proportional adjustment is required to align with the declared amount. Conversely, if the tax calculation exceeds the declared tax, taxpayers are obligated to pay the difference, ensuring fairness and accuracy in tax collection.

Addressing Tax Evasion:

The Tax Evasion Sector is tasked with addressing cases of tax evasion that have been reconciled, provided that the cumulative annual known and undisclosed sales do not exceed the ten-million-pound threshold.
This process adheres to the provisions set out in Article Three, without prejudice to the stipulations outlined in Article 75 of the Unified Tax Procedures Law No. 206 of 2020 regarding reconciliation.

Automated Application:

Article Three of Law No. 30 of 2023 is applied automatically by the competent authorities, eliminating the need for taxpayers to initiate requests. However, it is essential to note that taxpayers retain the right to request tax adjustments in accordance with the provisions of the Income Tax Law No. 91 of 2005.
In summary, the implementation of Article Three of Law No. 30 of 2023 represents a significant stride toward streamlining tax procedures and expeditiously addressing tax disputes. This initiative benefits both small businesses and individual taxpayers, fostering compliance, and contributing positively to overall economic growth. The legislative approach taken reflects a commitment to modernizing the tax system while ensuring fairness and transparency.

Conclusion:

The enactment and implementation of Article No. 3 of Law 30 of 2023 mark a transformative moment in Egypt's approach to taxation, particularly in addressing disputes and enhancing compliance. By focusing on streamlined processes, clarified tax terminology, and a comprehensive scope that includes various entities, the law aims to foster a more efficient and equitable tax environment. This is particularly significant for SMEs, which are vital to the economic fabric of Egypt and often the most impacted by complex tax regulations.
As Egypt continues to evolve its legal and economic landscape, laws such as these play a crucial role in aligning national objectives with the needs and realities of businesses and individuals. It is a step towards simplifying tax administration, encouraging business growth, and ultimately contributing to the nation's broader goals of economic development and stability. The successful implementation of this law will depend on continued collaboration between the government, businesses, and other stakeholders, along with a commitment to adapt and refine processes as necessary to meet the changing economic and
business environment.

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