SAP add-on for Egypt e-invoicing (15 November 2020)

The Egyptian Ministry of Finance has recently stated that its draft law about electronic invoicing will have positive economic effects. More VAT taxpayers will be registered, and VAT revenue will increase.

The Egyptian decree states that registered taxpayers must issue an electronic invoice containing the issuer's electronic signature and a Unified Code for each good or service supplied – all of which should be authorized by the Head of the Tax Authority (a clearance model). Failing to do so would be considered tax evasion by the tax authorities.

The new Egyptian system should detect mistakes in invoices and proactively inform taxpayers for corrective actions. The tax declaration system requires required information such as the tax identification number, national ID number, name, and domicile of the vendor in the taxpayer's purchase invoice. Such information shall facilitate a more real-time tax audit as an automatic assessment of sales, and purchase invoices will take place.

In cooperation with an experienced international corporation, the Ministry of Finance is currently working on automating the tax declarations system fully. VAT declaration shall be automatically filled via invoices to trigger the first step of electronic invoices. Taxpayers can upload details of their invoices through a simplified, automated accounting tool, an Excel sheet, or type them manually onto the program, the statement noted. Further details about this new law introduction will be published in the official Egyptian Gazette ("al-Waqā'i'al-Miṣriyyah").

Egyptian VAT-registered businesses must issue electronic tax invoices that include the electronic signature of its issuer and the standard code for the excellent or service subject to the invoice approved by the Egyptian tax authorities. The head of the Egyptian tax authorities determines the technical controls and conditions and the stages of implementing the e-bill system.

Egypt has published e-invoice instructions, and the Egyptian authorities have selected as a first wave, individual large taxpayers. The deadline for execution is 15 November 2020.


What do we offer?

The partners Key Group and Diseno Consulting are jointly developing the SAP add-on for Egypt, and we have closed a strategic partnership agreement with SAP's gold partner 'Logical Application for Business Solution' (LABS), from Cairo in Egypt. With LABS, we are working, for example, on the Digital Signature to ensure a smooth e-invoicing process with the Egyptian tax authorities. LABS is our exclusive partner and is fully engaged during R&D and implementation of our e-invoicing SAP add-on for Egypt.

KG and LABS have both clients that are selected by the government for the above-mentioned first pilot phase.


What is an SAP add-on?

An SAP add-on enhances standard SAP itself.

Add-on components are extra functionalities that do not come with the main SAP product. Different organizations have different requirements. SAP has recognized that and facilitated that additional functionality can be added and that such functionality as a component can be integrated with standard SAP.

An add-on is permitted by SAP – the code 'ABAP' is written and transported where SAP allows it. That means these add-on components sit above the core and access the same dictionary objects or repository objects and perform the required functionality. It contains custom authorization objects according to SAP standards.

SAP add-on solutions are, therefore, without an external interface or external software and can be implemented with minor or no SAP impact in any other area. An SAP add-on does not change the programming code of SAP. As a result, SAP upgrades do not lead to any problems, and maintenance is straightforward.

Additional functionality is added to standard SAP:

'User-friendly, manageable, scalable, extendable, upgradeable, reliable, sustainable, SAP integrated, VAT compliant, audit trail'


Take aways 

Anticipate what users would want

We combine technical knowledge with industry understanding and knowhow of technologically advanced tools and methodologies available in the market or developed by ourselves.

What do we like to achieve

  • Focus on tax processes that could be improved
    • Manual process: same data requests are made by different stakeholders
  • As Is assessment
  • Anticipate future changes and the data needed
    • What are tax trends?
    • What is happening locally and what should be considered across jurisdictions where you operate?
    • Anticipate new stakeholders and their data needs or requests (internal and external)
  • Define scope and actions for short, mid and long term
  • Write business case for change
  • Realize sponsorship for implementation

‘As is’ assessment, actions and business case

  • What tax data is requested and by whom?
  • What tax process can be improved and what can be automated?
    • CIT, VAT, tax data warehouse
  • What is the Return on Investment?
    • Hard saving: process improvement
    • Meeting (new) tax requirement
  • What systems are in use: SAP, Oracle, etc
    • By which entities?
  • How many end-use computing tools (e.g. excel spreadsheet) do we have?
  • How do we avoid an ad-hoc solution?
    • Understand the bigger picture
    • Real problem and not the symptom

Risk and reward

Technology-related tax risk: understand and address the potential harms and benefits of (new) technology.

Technology tools & systems integration

Ascertaining proper IT support for ensuring efficient, timely and reliable reporting.

Change and project management

VAT should be considered in every aspect of the process, from concept through completion and beyond. Managing by design — looking at any process or transaction from end to end and factoring in all the requirements and controls essential to designing and optimizing a compliant VAT process.

Effective communication and teaming

We speak the language of the business and IT and no translation is needed.

Set up a project plan

  • Set up a project charter that will take effect preferable during feasibility but ultimately during design
  • Write a business case and problem statement
  • Define scope of the project
  • Define objectives and goals of the project
  • Involve stakeholders and define priorities
  • Set measurable milestones
  • Ensure that the right sponsors provide buy-in.
  • Identify (project) risks and how to manage them
  • Jointly validate and refine the project plan and develop a roadmap to success
  • Hold regular meeting to track progress of the various work streams

From concept through completion and beyond

VAT should be considered in every aspect of the process, from concept through completion and beyond.

Managing by design

Looking at any process or transaction from end to end and factoring in all the requirements and controls essential to designing and optimizing a compliant VAT process.

Global tax environment is in a state of fast change

The key to success in the management is the ability to translate tax knowledge into workable business processes.

Risk: a domino-like effect

With indirect taxes intertwining through the day- to-day operations of a company—raising sales invoices, moving inventory, paying suppliers, collecting cash—indirect tax risk can have a distinct and domino-like effect on the commerciality of an organization.

Tax audits and new technology

More than 80% of businesses are still using spreadsheets to manage their VAT compliance in at least one jurisdiction in which they operate, despite tax authorities around the world investing in better tools.

OECD's Standard Audit File for Tax Purposes

The SAF-T standard, originally created by the OECD (similar as BEPS), is intended to give tax authorities easy access to the relevant data in an easily readable format for both corporate income tax as VAT.

What if there are glitches in your data, input errors, empty fields, awkward descriptions in fields or apparent inconsistencies?