Foreign oil firms voice concerns over plan to register crude suppliers

Foreign oil players aren’t happy with the government’s plan to register crude oil suppliers ahead of implementing recent VAT amendments that would see them face a 10% tax, people familiar with the matter told EnterpriseAM.

BACKGROUND- The Finance Ministry is looking into registering crude oil suppliers under the simplified system with the Egyptian Tax Authority (ETA) in the foreign suppliers registry, which would allow for reverse tax charging.

The move would see the Egyptian General Petroleum Corporation (EGPC) collect the tax and verify that the companies have paid it, which would allow foreign suppliers to deduct the sum from their tax obligations in their home countries. The EGPC will pay the VAT after collecting it from the supplier, as it is considered an indirect tax. It will also include controls for issuing electronic invoices between the EGPC and its suppliers, including foreign players and irregular suppliers.

Why are foreign firms worried? Representatives from four foreign firms — BP, Eni, Apache, and Dragon Oil — noted that registration with the Egyptian tax system is not stipulated in their agreements, seeing as petroleum agreements follow a standalone legal framework, distinct from local laws. They raised these concerns during a meeting earlier this week with Finance Minister Ahmed Kouchouk and Deputy Finance Minister for Tax Policy Sherif Al Kilani, according to our sources.

Officials vow to address this issue: Kouchouk promised to hold intensive meetings between officials from the Finance Ministry and the ETA to develop a special protocol for foreign oil companies. This protocol will exempt foreign firms from e-invoicing; instead, they will submit a simplified request and a declaration of the quantities supplied to the EGPC, not the ETA, according to our sources. The EGPC will then be responsible for registering the data to ensure the implementation of the new tax. The issue is expected to be resolved before the end of this month.

Until then, oil firms' representatives will contact the EGPC about continuing supply operations without invoices.

SOUND SMART- The e-invoicing system aims to create a centralized system that allows the ETA to monitor all commercial transactions between companies (B2B) and between companies and consumers (B2C). However, this applies only to local firms.

REFRESHER- President Abdel Fattah El Sisi last month ratified VAT amendments, which are estimated to help the government bring in an additional EGP 200 bn in tax revenues. These amendments introduce a new tax treatment for crude oil — making it subject to a 10% tax.