Scope of mandatory e-invoice clearance extended
The global trend of Continuous Transaction Controls (CTCs), having spread from Latin America to Europe and more recently to Asia, is now increasingly gaining popularity in Africa. Egypt is modernizing its tax control system, and one of the most important elements of this is implementing the digital processing of invoices.
The electronic invoice project is one of the pillars of the comprehensive digital transformation of the Egyptian tax system. The project’s aim is to create a central solution that enables the Egyptian Tax Authority (ETA) to follow all business transactions between companies (B2B), through the instant exchange of invoice data in electronic format. The e-invoicing platform will enable digital capturing of invoices circulating in the country starting with B2B invoices and later also business to consumer (B2C) invoices.
Legal Background
On 26 March 2020, the Egyptian Minister of Finance published a decree (No:188-2020) announcing the decision to introduce a mandatory clearance e-invoicing framework which means all issued invoices must be digitally transmitted to the tax authority in real-time before being sent to the customer. The decree states that all VAT-registered businesses are obliged to issue an electronic invoice containing the issuer’s electronic signature and a unified code for the goods or service.
On 2 August 2020, the ETA published another decree (No:386-2020), effectively listing 134 companies who are obliged to issue electronic tax invoices for their sold goods or rendered services as of 15 November 2020. This date marked the first phase of a broader roll-out of the e-invoicing obligation that is set to gradually cover the entire national economy. In addition to the first wave of companies that must comply, voluntary adoption of the e-invoicing system is permitted, given that the conditions and controls are met.
A closer look at the e-invoicing flow
E-invoices must be created in JSON or XML format and contain the issuer’s electronic signature and a unified code for the goods or service. After signing, the e-invoice is sent to the ETA’s system to confirm the electronic signature and the content of the invoice. The ETA receives the invoice and issues a single coding for each product (item) in the invoice and stores it in the ETA system.
The ETA approves the invoice and sends a notification to the buyer and the seller who should be registered with the ETA system. The e-invoice is shared through different ways such as web services, SMS, e-mails, or mobile applications. The ETA’s system will store, save, share, audit, analyze and archive the data from the e-tax invoice system. However, companies must also archive their e-invoices in a human readable PDF format ready for inspection by the ETA upon request.
What’s next?
On 20 November 2020, the ETA published yet another new decree (No:518-2020), which lists 347 companies, as a second phase, who are obliged to issue electronic tax invoices for their sold goods or rendered services as of 15 February 2021. Even though it’s not yet formally binding, it was announced through the media that by the end of June 2021 the e-invoicing system will be mandatory for all companies. Taxpayers in Egypt must be prepared for the mandate that will, at some point, require them to implement e-invoicing.
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