Egypt exempts consumer finance services from VAT

Alyaa Stohy
3 Min Read

The Financial Regulatory Authority (FRA) and the Egyptian Tax Authority have agreed to exempt consumer finance services from value-added tax (VAT), according to FRA Vice-Chairperson Islam Azzam.

The services included in the VAT exemption included those provided by companies or providers of consumer financing. The move comes as part of the Egyptian Government’s endeavours to overcome any obstacles facing those authorities that practice non-banking financial activities (NBFS).

Azzam said that the FRA has responded to the demands of companies and service providers who engage in consumer finance activity to equate them with companies operating in the field of financing activities. 

This will see these companies, active in the real estate, financial leasing, factoring, and securitisation, exempt consumer finance services from VAT. This will affect the cost of the financing service provided to Egyptian citizens, reducing the financial burden on them. It is based on the provisions of Article 2 of Law No 18 of 2020 regulating consumer finance activity. 

It stipulated that companies licensed by the FRA to engage in consumer finance activity are companies that perform services in the NBFS field.

Azzam praised the Egyptian Tax Authority’s rapid response, adding consumer financing to non-banking financial activities exempted in Clause Fourth of Article (78) of the Executive Regulations of the VAT Law issued by the Minister of Finance’s Resolution No (66) of 2017. 

It includes markets capital, futures exchanges, insurance activities, real estate financing, financial leasing, factoring and securitisation, as well as micro-activity, all of which are subject to the FRA’s supervision. The non-banking financial activities mentioned in Article (78) of the Executive Regulations of the Value-Added Law were mentioned only as an example.

Azzam stressed the FRA’s endeavour to overcome any obstacles facing the expansion and growth of consumer finance activity by continuing to hold meetings with representatives of consumer finance activity. 

They were only held 15 months ago with the issuance of the law regulating consumer finance activity and the subjection of its practitioners to the control and supervision of the authority. 

However, the number of licensed consumer finance companies has reached 12 so far, and 13 service providers were licensed too. During the first five months of 2021, the volume of consumer finance amounted to approximately EGP 5.5bn to about 515,000 customers.

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