E-invoicing in Egypt: the mandate and its effect on cost deduction

Costs and expenses are deductible from commercial and industrial profits, and from the income of legal persons determined under the same rules, only if supported by electronic invoices from July 2023 or electronic receipts from January 2025, save for the exceptions in the text. This is item 2 of article 22 of the Income Tax Law issued by Law 91 of 2005, as replaced by Law 30 of 2023 (Official Gazette, issue 24 continued, 15 June 2023). For value added tax, since 1 July 2023 only electronic invoices count for the deduction of input tax by those registered on the e-invoice system.

The obligation to issue electronic invoices is addressed to companies and other legal and natural persons who sell goods or provide services. They must record all their purchases and sales on the electronic system and issue, for every sale, an electronic invoice signed electronically by its issuer. It rests on article 35 of the Unified Tax Procedures Law issued by Law 206 of 2020 (Official Gazette, issue 42 bis (C), 19 October 2020) and article 34 of its executive regulations issued by Minister of Finance Decree 286 of 2021 (Al-Waqa'i al-Misriyya, issue 123 continued (C), 3 June 2021; "the Regulations"). The system applies in phases set by the Minister of Finance on the proposal of the Head of the Egyptian Tax Authority (the ETA).

The electronic invoice and the electronic receipt

The fourth paragraph of article 37 of Law 206 requires the tax invoice, and the professional receipt of those practising a liberal profession, to be issued as an electronic document in the form set by the Regulations. The Regulations require the issuer's valid electronic signature, use of the unified goods and services coding system set by a decision of the Head of the ETA, and real-time transmission of the invoice to the system to verify its validity and the signature; once the ETA accepts the invoice, it gives it a unique number (article 35 of the Regulations). The invoice carries the buyer's registration number where the buyer is a taxpayer or a taxable person (article 43 of the Regulations).

The electronic receipt is issued for services rendered and goods sold to the final consumer, and is sent to the system in real time once it is integrated with the taxpayer's invoicing system (ERP) or point-of-sale devices (POS) (articles 1 and 2 of Minister of Finance Decree 230 of 2022, Al-Waqa'i al-Misriyya, issue 116 continued, 25 May 2022). Its main phases and sub-phases are in that decree's table as amended by Decree 38 of 2024 (Al-Waqa'i al-Misriyya, issue 24 continued (B), 30 January 2024), and are set out in Egypt's electronic receipt: who must issue it, when, and the penalty.

The ETA gives a taxpayer obliged to issue electronic invoices or receipts a certificate to that effect on Form 3, showing the date from which the obligation applies, and the certificate must be displayed where the public can see it at the head office and branches (the paragraph added to article 34 of the Regulations by Minister of Finance Decree 309 of 2023, Al-Waqa'i al-Misriyya, issue 145 continued (A), 5 July 2023).

Law 150 of 2026 (Official Gazette, issue 30 bis (A), 28 July 2026) added article 27 bis to Law 206. Under it, the ETA may, at the taxpayer's request, grant a temporary tax card for eight months to complete the formalities for incorporating and licensing the activity, and the card may not be used to issue electronic receipts or invoices. The detail is in Egypt temporary tax card.

The effect on cost deduction and input tax

Item 2 of article 22 of Law 91 requires deductible costs and expenses to be "real and supported by electronic invoices or receipts, from July 2023 for electronic invoices and January 2025 for electronic receipts" (unofficial translation), and allows the Minister to extend either date by no more than a year, as the executive regulations of that law provide. The latest dates an extension could reach, July 2024 for invoices and January 2026 for receipts, have both passed. Costs not customarily documented are excepted, and the Minister may exempt certain costs and expenses from the requirement of an electronic invoice or receipt. The net income of legal persons is determined under these rules except where a special provision applies (article 51 of Law 91).

The executive regulations of the Income Tax Law provide that, in determining the net commercial and industrial profits of taxpayers registered on the electronic tax invoice system, only electronic invoices count as evidence of deductible costs and expenses from 1 July 2023, and paper invoices drawn up by taxpayers before the date from which they were obliged to issue electronic tax invoices are excepted (article 28 bis of the executive regulations of the Income Tax Law, as added by Minister of Finance Decree 188 of 2023, Al-Waqa'i al-Misriyya, issue 83 continued (F), 9 April 2023).

For value added tax, from 1 July 2023 only electronic invoices count for deducting or refunding the tax for those registered on the electronic tax invoice system. Paper invoices drawn up by taxable persons before the date from which they were obliged to issue electronic tax invoices are excepted (article 38 bis of the executive regulations of the Value Added Tax Law issued by Law 67 of 2016, as added by Decree 188 of 2023).

In our view, this consequence often outweighs the fine. A cost not supported by a valid electronic invoice is rejected on tax inspection, which increases taxable profit, and the input tax paid on it is not deductible, which increases the VAT payable. A business buying from a supplier who is obliged to e-invoice but does not do so bears that consequence, even though it is itself compliant. We therefore recommend making the electronic invoice a condition of the contract with the supplier, not a step taken at posting.

The fine itself: breach of article 35 (paragraphs 1 and 2) and article 37 (paragraphs 1 and 4) carries a fine of not less than EGP 20,000 and not more than EGP 100,000 (article 71 of Law 206).

Common errors in practice

The taxpayer's name, address and registration number are invoice data (article 37 of Law 206), as are the company's activity code and the code of the issuing branch (article 42 of the Regulations, as replaced by Decree 188 of 2023). In our view, correcting them after a large number of invoices have gone out is expensive and calls for notes.

Use of the unified coding system for goods and services is a condition of the system (articles 34 and 35 of the Regulations), and the invoice is sent to the system to be verified before it is accepted. We recommend mapping every item in the accounting system to its code before issuing, not at the point of issue.

The buyer may reject an invoice, and the seller may cancel it with the buyer's consent, within periods set by a decision of the Head of the ETA (article 43 of the Regulations). In our view, a rejected or cancelled invoice should not be posted, and its correction should be pursued with the supplier, because posting it creates a difference between the books and the system that surfaces on tax inspection.

The rules for issuing electronic invoices apply to credit and debit notes (article 43 of the Regulations), and a note must show the number and date of the original tax invoice (article 11 of the executive regulations of the Value Added Tax Law).

We recommend reconciling the system with the books in both directions, meaning what was issued on the system and not posted and what was posted and not issued, and doing so monthly rather than annually: a month's difference is corrected, a year's is argued.

The electronic signature certificate (the token) has an expiry date, and the Regulations require a valid signature by the invoice's issuer (article 35 of the Regulations), so its expiry stops issuing until it is renewed.

What we recommend

• Confirm the decision that brought the business within the electronic invoice and the electronic receipt, and the date from which it applies.
• Make the electronic invoice a condition of contracting with suppliers, rather than asking for it at the point of posting.
• Set item codes and taxpayer data before issuing begins.
• Reconcile the system against the books monthly, in both directions.
• Record the electronic signature certificate's expiry date among renewal deadlines.

The firm's Tax Department activates the system, sets up codes and data, runs the periodic reconciliation and deals with rejected documents.

Mahmoud Nassef, Founder Partner
Chartered Accountant, Ministry of Finance, Egypt

Member, Egyptian Society of Accountants & Auditors
Member, Egyptian Tax Society
Member, Egyptian Society for Public Finance and Taxation

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Disclaimer: This bulletin is prepared for general information on the legislation in force at the date of its publication. It does not constitute a professional opinion or tax or legal advice on any particular matter, and it should not be relied upon in place of advice based on an examination of the circumstances of each case. Nassef & Partners International accepts no responsibility for any action taken, or refrained from, in reliance on its contents. The positions stated remain subject to subsequent legislation and decisions.