[Global IDT Insights] Egypt Amends VAT Rules on Construction Contracts and Production Inputs & More

Editorial Team – [2025] 180 taxmann.com 706 (Article)

Global IDT Insights provides a weekly snippet of tax news specifically related to Indirect Taxes from around the globe.

1. Egypt amends VAT rules on construction contracts and production inputs

Egypt has issued two ministerial decrees amending the executive regulations of the Value Added Tax (VAT) law, with the aim to simplifying compliance and clarifying the tax treatment of construction contracts and production inputs. The Ministry of Finance announced these amendments, signalling continued efforts to modernise and strengthen transparency in Egypt’s indirect tax system.

The first decree introduces changes to the VAT executive regulations, whereas the second decree sets out accounting rules for applying VAT to construction and contracting contracts signed before 18-07-2025 and still in force thereafter. Such contracts must now be supported by a certified consultant’s statement, an electronic invoice, or an e-receipt.

Key aspects of the amendments include:

(a) Expanded scope of deductible inputs – Businesses may now claim VAT deductions on a broader range of indirect costs, including financing expenses, construction-related costs, indirect production and operational expenses, sales and distribution costs, and administrative overheads.

(b) Revised VAT suspension mechanism – The suspension of VAT on disassembled production lines purchased locally or imported in split shipments will now begin from the date of purchase of the final local component or the customs release of the last shipment.

(c) Clarified VAT treatment for ongoing construction contracts – The new accounting framework specifies VAT application for contracts issued before 18-07-2025 that are still under execution.

(d) Effective date – The amendment shall be effective from 29-10-2025.

Businesses engaged in construction, contracting, and manufacturing should reassess their VAT accounting systems to incorporate the revised rules on deductible inputs and contract-based VAT treatment.

Through these changes, Egypt continues to advance toward a more transparent and efficient VAT system, consistent with global trends in digital tax administration and indirect tax modernisation.

Source – Official Source

2. Vietnam issues guidance on VAT for agricultural products used as animal feed

Vietnam has issued a clarification on how VAT applies to agricultural products that are supplied for use as animal feed. Businesses in the cassava sector reported that different tax offices were applying different VAT rates- some using 10% (temporarily 8% until 31 December 2026), others using 5%, and some treating the same products as non-taxable.

This inconsistency created confusion because enterprises did not have a single, uniform rule to follow when selling dried cassava pulp and dried cassava slices.

The Ministry of Finance has therefore explained the relevant provisions of the VAT Law and the implementing decree to remove ambiguity.

(a) Animal feed is non-taxable – The clarification refers to the legal rule that animal feed is classified under non-taxable goods. It states that animal feed defined under relevant animal husbandry and aquaculture legislation is not subject to VAT. Accordingly, when dried cassava pulp or slices meet this definition, they fall entirely outside the VAT system.

(b) When goods do not qualify as feed, minimally processed agricultural products may attract 5% VAT – If a product does not qualify as animal feed, it is then assessed under the rules for agricultural goods. In such cases, if the item is a product that has not been processed into other products or has only undergone conventional preliminary processing, it falls under the 5% VAT category.

(c) Clarification on what constitutes conventional preliminary processing – Products are regarded as having only undergone conventional preliminary processing when they have simply been cleaned, dried, peeled, milled, broken into pieces, crushed, hulled, separated from seeds or stems, cut, polished, glued, divided into parts, deboned, chopped, skinned, rolled, or salted.

They may also be sealed in airtight cans, refrigerated (chilled or frozen), preserved with sulfur dioxide, preserved by adding chemicals to prevent rotting, or soaked in sulfur solution or other preservative solutions. All such handling steps constitute conventional preliminary processing.

(d) Authority for determining processing status where classification is uncertain – Where it is not possible to determine the processing status of the goods, the Ministry of Agriculture and Environment will make the determination. This assessment will be based on the production process information provided by the taxpayer and will confirm whether the goods have not been processed into other products or have only undergone conventional preliminary processing. This determination applies to products produced, caught, or sold by organizations and individuals, as well as at the import stage, in accordance with the applicable legal provisions.

Source – Official Source

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