Governor of the Central Bank of Egypt (CBE) Tarek Amer informed the Ministry of Finance officially that the banks operating in the local market have refused to register under the Value Added Tax (VAT). A high-level meeting was held last week between leaders of CBE and the Ministry of Finance to discuss how to resolve the issue.
According to a prominent banker, who wished to remain anonymous, CBE is currently awaiting the Ministry of Finance’s response to the demand set forth by the banks calling for their exemption from applying or registering under VAT.
The Egyptian Tax Authority previously demanded that banks operating in the local market register under VAT as a first step towards obliging them to pay the tax.
The banks however have rejected the tax authority’s demand. The Federation of Egyptian Banks (FEB) drafted a memorandum declaring their definitive rejection of the tax and submitted it to Amer to communicate it to the Ministry of Finance and the Tax Authority.
The memorandum was among the first issues presented to Amer directly after he took office and he already communicated with the Ministry of Finance.
The source explained that the Tax Authority is trying to apply VAT on banking transactions, as an alternative to the sale tax, despite banks being exempted from the sales tax by law.
The tax authority called on banks to register first under VAT, noting that the nature of the banking services subject to the tax would be determined later. However, the banks rejected this demand as well.
A prominent figure in the legal field asserted that registering for the tax would place banks at the mercy of the Tax Authority since the authority may choose to apply the tax at any time. The source predicted that this may open the door for fresh disputes between the banks and the authority.
In the same context, the Federation of the Egyptian Banks and the Egyptian Tax Authority reached a final agreement a few days ago to settle the disagreements between them regarding the stamp tax. The agreement was signed on 15 December.
According to a statement from the Federation of Egyptian Banks, the agreement was reached after a committee was formed by the two parties to discuss the issues regarding taxes between the banks and the authority.
The federation said the agreement is binding for both parties, thereby putting an end to any judicial disputes between the banks and the Tax Authority.