The Egyptian Automotive Dealers Association presented a memorandum to Minister of Finance Amr Al-Garhi demanding more clarification about the mechanism of collecting development fees on imported and locally-assembled cars and the tax treatment standards of car warranty.
It came after the development fees on cars and auto components have increased significantly in the last period, after the collection of the value-added tax.
According to the circular No. 44 of 2016 issued by the Customs Authority, the development fee consists of the price of the vehicle, the excise tax, and the insurance. However, Article 17 of Article 1 of the Development Fee Law, No. 147 of 1984, and amendments stipulate that the locally-assembled cars are treated in accordance with the specific value of the vehicles including only sales tax. The development fees on imported vehicles are calculated based on the total value of customs duties, sales tax, and others.
The memorandum noted that Law No. 147 of 2004 stipulates that the development fee should be collected based on the value of the vehicle including the sales tax. However, Law No. 67 of 2016 stipulates that the calculation of the development fee should be based on the value-added tax, not sales tax. The association demanded clarification about the mechanism of calculating the tax treatment for car insurance, which should not be included in the services listed in the table accompanying the law. They pointed out that the insurance service offered by the manufacturing and importing companies is provided separately from the value of the car, noting that the distributor has the right whether to purchase the service or not.