Egypt's new value-added tax was officially implemented on Friday shortly after Egyptian President Abdel-Fattah El-Sisi ratified it, Egypt's finance ministry said in a statement on Saturday.
The statement added that following Eid Al-Adha holiday this week, meetings would be held with business representatives to explain the mechanisms that the ministry would use to ensure correct implementation of the new law, as well as clarifying the needed procedures for companies paying the tax.
The ministry added that the law allows a three-month deadline as a transitional period so that companies and all those involved within the law can adjust their conditions, stressing that no fines would be imposed for a delay in payments of the due tax.
According to Article 9 of the VAT law, bylaws on the tax's implementation will be issued by the finance minister within 30 days from the law's ratification in the official gazette.
In August, Egypt's parliament approved the law at a rate of 13 percent for the 2016/17 fiscal year, to rise to 14 percent the following year.
It also increased the list of exempted commodities to 56 from 52 items.
The exemption list includes all essential food goods, dairy products, baby formula and all local and imported medicine.
Non-exempted goods and services falling under the new tax would include TV and radio production, taxed under the new VAT at a rate of 5 percent, imported vegetables, imported wheat products, cosmetic surgeries for non-medical causes, alcoholic drinks, and mobile phone services.
The VAT aims at reducing tax evasion, as it will be applied to each member of the production chain of goods and services, instead of the current sales tax that is imposed as a one-off on the final sale to customers.
The long-awaited VAT law is part of the government's fiscal reform programme, implemented in July 2014, through which energy subsidies are being cut and new taxes are being introduced to reduce the country's ballooning budget deficit – estimated at 11.5 percent of GDP in fiscal year 2015/16.
The reform programme, which has been endorsed by the International Monetary Fund, has lead to an initial agreement between the government and the global lender on a $12 billion fund facility over three years.
The initial accord is expected to be approved by the fund's executive board in the coming weeks.
President El-Sisi has strongly campaigned in recent months for his programme of economic reforms stressing on more than one occasion "that there is no time to postpone reforms that should have been put in place years ago."
Egypt, which relies heavily on imports, particularly of foodstuffs, has been suffering a severe shortage of US dollars in the wake of political and security unrest that has scared off tourists and foreign investors, two major sources of hard currency.
