Exported services to be treated as VAT zero-rated under new rules clarification

The Finance Ministry finalized a new implementation mechanism to exempt exported services from the 14% value-added tax, resolving a years-long confusion that has denied many companies the benefit of either an export tax break or the ability to claim input VAT refunds. Sources familiar with the directive told EnterpriseAM the move is expected to give a significant boost to Egyptian export revenues by opening the door for a broader range of firms — including tech services and web design providers — to better compete globally.

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The move is more of a clarification than the announcement of an entirely new initiative, as the VAT Act has technically treated exported services as zero-rated since it came into force in 2016. However, the lack of clear implementation rules created years of contradictory interpretations by tax officials, leaving many service exporters unable to claim input VAT refunds or apply the zero rate.

ICYMI- Three government sources told EnterpriseAM earlier this year that the Finance Ministry is currently working on a draft decision that would see the application of a zero VAT rate on exported services, provided that the service recipient is outside the country and the service provider is local.

The Tax Authority last month issued executive instructions laying out how service providers can apply the zero-rate VAT. The decision states that service exports provided by a registered local supplier to a recipient based outside Egypt will be zero-rated and eligible for input VAT recovery — even if the service provider is a non-resident, so long as the service is performed from within Egypt. The move comes in line with Finance Ministry instructions and aims to unify tax treatment across all local tax offices, according to Tax Authority head Rasha Abdel Aal’s remarks to reporters.

Under the rules, service exports must be provided remotely — without a physical presence for either the supplier or the customer. This means the zero-rate VAT can be applied when a registered Egyptian firm delivers a service to a non-resident client abroad — even under reverse-charge arrangements or local tax regimes in the buyer’s country. In all cases, the service must originate in Egypt.

But the rule won’t apply to local branches of foreign companies, with these services to be treated as local and will be taxed at the standard 14% VAT rate. The decision treats these as domestic transactions given the recipient’s permanent presence in Egypt.

After-sales services such as maintenance and spare parts supply are also excluded from the zero-rate treatment, as they require a physical presence or handling of physical goods — which runs counter to the remote provision rule.

Services related to immovable property — such as real estate — will not qualify for the zero-rate treatment, even if the client is located abroad. The decision cites the domestic nature of the serviced asset.