Debit Note in Egypt: Rules and Requirements

Debit Note in Egypt: Rules and Requirements

Egyptian businesses may issue debit notes under the Egyptian Tax Authority (ETA)-regulated VAT system. A debit note is a legal document used to increase the value of a previously issued tax invoice when goods or services were undercharged or additional charges are required. It applies to VAT-registered businesses and ensures that the taxable value reported aligns with the corrected transaction. According to Egypt’s rules, a debit note may be used to adjust a previously issued invoice by increasing the value and linking it to the original transaction. Businesses use debit notes to account for added charges or pricing errors. This blog explains when to issue a debit note in Egypt, the required contents, and practical examples of scenarios.

What Is a Debit Note in Egypt

A debit note is a commercial document issued by a seller to a buyer when the amount on a previously issued tax invoice needs to be increased. It acts as the opposite of a credit note, instead of reducing the amount payable, it raises it. The issuing of a debit note ensures that the correct amount is billed and that the business can recover the additional payment owed.

Under Egyptian VAT law, businesses must issue tax invoices for taxable supplies. In the case of adjustments where the value of the original invoice was too low, a debit note may be used to reflect the increased value of the same goods or services sold. As part of the mandatory e-invoicing system, the ETA recognises “Debit Note” as a document type used to update previously issued invoices by increasing the amount.

It’s important to note: the issuance of a debit note does not replace the need for a full new tax invoice if a new supply of taxable goods or services is made. If the adjustment reflects a new taxable supply, then a new invoice must be issued. The debit note is specifically for adjustments to existing transactions.

When to Issue a Debit Note in Egypt

You should issue a debit note in Egypt when the amount on the original tax invoice is lower than it should have been. Common cases include:

• Errors in calculation – e.g., the total on an invoice was added incorrectly and the buyer was under-billed.

• Missed charges – e.g., additional freight, packaging, or handling costs were omitted from the original invoice.

• Additional goods or services – e.g., extra units delivered, extra service hours provided after the original invoice. In such cases, if the extra supply is taxable and constitutes a new supply, a new tax invoice should be issued instead of a debit note.

• Change in exchange rate (for foreign currency transactions) – if the original invoice used an exchange rate and subsequent adjustment is needed to reflect the correct rate.

The key thing: the adjustment must relate to the same supply as originally invoiced. If you’re making a separate supply, treat it as a new invoice rather than a debit note.

Key Details Required on a Debit Note in Egypt

For a debit note to be valid under Egyptian law and the ETA’s e-invoicing system, it must include certain details. Based on VAT Law No. 67 of 2016, its Executive Regulations, and related directives:

A valid debit note should show:

• The words “Debit Note” clearly at the top of the document.

• Supplier’s details – name, address, VAT registration number of the supplier (the VAT registrant).

• Customer’s details – name, address, and if applicable, the customer’s VAT registration number (if the customer is VAT-registered).

• Reference to the original tax invoice number and date – both must be stated to link the debit note to the correct supply.

• Reason for the adjustment – e.g., underbilling, omitted freight, additional service hours.

• Description of adjustment – a clear explanation of the goods or services being added or corrected.

• Amounts – the additional charges and the resulting new total payable. If VAT is affected, the taxable value, VAT rate, and VAT amount should be shown clearly.

• Date of issue – the date when the debit note is issued. Adjustments must be recorded in the VAT return for the period in which the debit note is issued.

• Unique identifying number – the debit note must carry a distinct serial number consistent with your document numbering system.

• Linked UUID or unified code (for e-invoicing) – under Egypt’s e-invoicing system, each document (invoice or debit note) must carry the ETA-issued unique identifier (UUID) for traceability.

Scenarios Where Debit Notes Are Used in Egypt

Here are practical examples of when Egyptian businesses might issue debit notes:

• Freight Charges Omitted: A company issues an invoice for goods sold but forgot to include the freight cost. The supplier issues a debit note to add the freight charge and increase the invoice value accordingly.

• Underbilling: The original invoice incorrectly listed a lower unit price than agreed. The seller issues a debit note to correct the price difference.

• Packaging or Handling Fees Added After Invoice: After issuing the invoice, the supplier realises additional packaging or handling costs apply. A debit note is issued to capture those extra costs.

• Exchange Rate Adjustment: If the original invoice was in foreign currency and after issuance the agreed exchange rate changes affecting the Egyptian pound amount, a debit note may be used to adjust the value.

• Additional Service Hours: If extra service hours beyond the original invoice period were rendered and these relate to the same service contract, a debit note may be appropriate. If the hours constitute a new service provision, a full new invoice may be required instead.

Record Keeping and Audit Requirements in Egypt

Under Egyptian VAT rules and the ETA’s e-invoicing mandate:

• Under VAT regulations and ETA’s e-invoicing requirement, businesses are required to maintain invoices, debit and credit notes, and related records for at least five years from the end of the tax period in which they were issued.

• E-Invoices and related documents should be maintained in a secure manner that allows records to be accessed in electronic format.

• The ETA will require that all applicable documents issued (invoices, debit notes) contain a unique document code (UUID) allocated by the ETA, and that the documents have been reported on the ETA portal.

• If ETA conducts an audit on your business, you will need to provide a link between each debit note and the corresponding invoice for documentation purposes.

• Failure to comply with record keeping requirements (for example, failure to retain documents for one of the required periods) can expose you to administrative fines or penalties in connection with the e-invoicing system.

Penalties for Incorrect Issuance of Debit Notes in Egypt

If a business issues a debit note incorrectly (for example: uses it when a new invoice should have been issued, omits required details, fails to link to the original invoice, or fails to report it properly via e-invoicing), the following may result:

• The adjustment could be denied for VAT purposes, which means the business cannot claim or offset VAT on the related amount from the previous advance debit note 

• The ETA could treat the document as non-compliant, it also may have administrative fines or interest for under reporting VAT.  

• Persistent or deliberate failure to issue valid tax documents may be regarded as tax evasion, which carries more serious sanctions under Tax Procedures Law No. 206 of 2020.

• Staff training and internal controls are key to avoid such risks.

Conclusion

A debit note in Egypt is a document that increases the value of a previously issued tax invoice, enabling sellers to correct under-billing, omitted charges, or adjustments to the original transaction. It applies to VAT-registered businesses under the ETA-regulated system. The debit note must include the supplier and customer details, the VAT registration number (where applicable), a reference to the original invoice number and date, the reason for adjustment, the description of added goods or services, and the additional amount due. It must also carry a unique identifying number and for e-invoicing compliance, the ETA-issued code. Keeping accurate records for at least five years, reporting via the e-invoicing system when required, and following the correct issuance rules will ensure compliance, prevent disputes, and protect your business from financial risks.

FAQs

1. Who can issue a debit note in Egypt?
    Only VAT-registered businesses (i.e., registrants under the VAT Law) may issue debit notes for adjustments to previously issued invoices.

2. What is the difference between a debit note and a credit note in Egypt?
    A debit note increases the payable amount on a previous invoice; a credit note reduces the amount owed.

3. Is VAT applied on debit notes in Egypt?
    Yes. If the original invoice and the adjustment relate to taxable supplies, the debit note must clearly show the additional value and associated VAT amount. If the adjustment relates to a new taxable supply, a fresh tax invoice is required.

4. How long must debit notes be kept in Egypt?
    Debit notes (and related invoices and records) must be retained for at least five years after the end of the tax period to which they relate.

5. Are electronic debit notes valid in Egypt?
    Yes. Under Egypt’s mandatory e-invoicing regime, debit notes may be issued electronically, provided they comply with the ETA’s format, carry the unique code and signature, and are submitted and archived according to the rules.