The Financial Regulatory Authority (FRA) and the Egyptian Tax Authority have agreed to exempt consumer financial services from value added tax (VAT), according to FRA vice president Islam Azzam.
Services included in the VAT exemption included those provided by businesses or consumer finance providers. The move is part of the Egyptian government’s efforts to overcome all obstacles faced by authorities engaged in non-bank financial activities (NBFS).
Azzam said that FRA has responded to requests from businesses and service providers who engage in consumer credit business by equating them to businesses operating in the field of finance business.
This will see these companies, active in real estate, leasing, factoring and securitization, exempt consumer credit services from VAT. This will affect the cost of the finance service provided to Egyptian citizens, thereby reducing the financial burden on them. It is based on the provisions of Article 2 of Law No. 18 of 2020 regulating the activity of consumer credit.
It stipulated that companies authorized by the FRA to carry out consumer credit activities are companies that provide services in the NBFS area.
Azzam praised the rapid response of the Egyptian tax administration, adding consumer finance to non-bank financial activities exempted by the fourth clause of article (78) of the executive regulation of the VAT law issued by resolution no. ° (66) of 2017 from the Minister of Finance.
It includes capital markets, futures exchanges, insurance activities, real estate financing, leasing, factoring and securitization, as well as micro-activity, all of which are subject to FRA oversight. The non-banking financial activities mentioned in article (78) of the implementing regulation of the law on added value were only mentioned by way of example.
Azzam highlighted FRA’s efforts to overcome any obstacles facing the expansion and growth of the consumer credit business by continuing to hold meetings with representatives of the consumer credit business. .
They only took place 15 months ago with the promulgation of the law regulating the activity of consumer credit and the submission 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 have also been licensed. In the first five months of 2021, the volume of consumer credit amounted to around EGP 5.5 billion for around 515,000 customers.