In late September 2021, the Egyptian Tax Authority (ETA) released a statement imposing taxes on bloggers and digital content creators, particularly YouTubers. The statement indicated that individuals engaged in online content creation (i.e. bloggers and YouTubers) should apply for income tax filing and register for VAT when their revenues exceed EGP 500,000 within 12 months from the date of commencement of their activity – according to head of the ETA, Reda Abdel-Kader.
In this vein, the ETA made clear that it actively follows up with the Ministry of Finance to list transactions made through e-platforms to determine who carries out them towards integrating the informal economy into the formal sector and securing rights of the State’s public treasury. As it turns out, the e-commerce unit at ETA is the entity primarily responsible for these operations, i.e. listing, following-through, and registering companies that engage in e-commerce activity.
How Blogging and Content Creation Relate to E-Commerce?
According to Wikipedia, a blog is a discussion or informational website published on the World Wide Web consisting of discrete informal text entries (posts). Until 2009, blogs were usually the work of a single individual, occasionally of a small group, and often covered a single subject or topic. In the 2010s, multi-author blogs (MABs) emerged, featuring the writing of multiple authors and sometimes professionally edited. The rise of social media and other microblogging systems helped integrate blogs into the news media. The word “blog” can also be used as a “verb”, meaning to maintain or add content to a blog.
On the other side, e-commerce is a modern form of marketing and selling imposed by changes in communication technologies. A commercial transaction can be deemed an e-commerce transaction when the Internet or any other electronic means are used for transferring the ownership of goods (selling) or delivering the required services. The outbreak of Covid-19 pandemic resulted in an unprecedented reliance on e-commerce worldwide. Sales teams came to receive purchase and sales orders and do marketing of services and goods through a variety of e-tools including phone, fax, television, and the internet, in substitution for traditional face-to-face meeting within branches.
Over time, blogs and blog content were used directly in e-commerce and advertising, either by advertising on bloggers’ sites or by employing the evolving model of Consumer Generated Advertising (sponsored content), a new model of business-to-consumer (B2C) marketing. Of all the different forms of blog advertising, sponsored posts are the most controversial. These sponsored posts may come in the form of comments, reviews, opinions, or videos, etc. with a link to the webpage or product pages of the website of the sponsor.
In this sense, blogs has led to the breakdown of the traditional advertising model in several sectors, where businesses can now bypass advertising agencies (which used to serve as the sole interface with the customer) and connect with customers directly via social media. This gave rise to the emergence of blog advertising companies that made capital out of this new development. However, this development was viewed negatively by many people who see any form of commercial activity on blogs as undermining the credibility of the blogosphere.
Merging Blogging into Formal Economy Globally
Recently, there has been a global drive towards integrating blogging and content creation activities into the formal economy, after hundreds of thousands of users have turned to using video platforms such as YouTube and Tiktok, along with other usual means of social communication, in lucrative commercial and advertising activities. Dozens of countries now have regulations for taxing content creators depending on earnings and means of content sharing. Examples of such countries include the United States and European Union (EU) countries, where governments in these countries work jointly with companies owning online content platforms to monitor the financial transactions of users.
Google, which owns Google AdSense, Google Ads, and YouTube, was one of the first collaborating companies. It deducts US taxes from YouTube earnings coming from U.S. viewers. Further, it formally asks users of its services to submit their tax info so that it can determine the correct withholding rate. If tax info isn’t provided, Google may be required to withhold at the maximum rate
Additionally, Google introduced YouTube Partner Program (YPP), which helps collect tax info from content creators. YPP provides a clear mechanism for deducting taxes from YouTube earnings from viewers of ad views, YouTube Premium, Super Chat, Super Stickers, and Channel Memberships.
Under Chapter 3 of the US Internal Revenue Code, companies, including Google were given the responsibility to collect tax info, withhold taxes, and report this to the Internal Revenue Service (IRS). Actual implementation of withholding procedures started in early June 2021. However, these companies are not eligible to provide content creators with advice on tax issues, as they need to consult tax professionals to better understand their tax situation
Monetizing creators on YouTube, regardless of their location in the world, were given a time limit to submit their tax info before 31 May 2021. If this tax info isn’t provided by the specified date, Google may be required to deduct up to 24 percent of the user’s total earnings.
In this respect, Google stated that tax-withholding requirements could differ depending on the creator’s country of residence and whether they’re eligible to claim tax treaty benefits or identify as an Individual or a Business. Withholding rates range between 0-30 percent on earnings of creators outside of the United States which they generate from viewers in the US. The rate depends on whether the user’s country has a tax treaty relationship with the United States or not. For business accounts, the default-withholding rate will be 30 percent on US earnings. If the payee is outside of the US businesses in the United States, it will be subject to 24 percent withholding on total earnings worldwide. For Individual accounts, backup withholding will apply and 24 percent of total earnings worldwide will be withheld.
The Tax Situation of Bloggers and E-Commerce Companies in Egypt
According to the ETA, there are three types of companies that engage in e-commerce activity: 1) companies that have e-commerce as one of its means for sales and distribution, 2) companies whose activity is based primarily on selling and distributing of goods and services through electronic means, and 3) companies that use digital platforms to display products and facilitate comparisons for buyers.
Regarding the tax status of companies engaged in e-commerce, the ETA clarified that with regard to income tax, all companies that engage in commercial or non-commercial activities (freelancers) are subject to income tax under Law 91 of 2005 and are, therefore, required to register and declare their income from the date of commencement of activity.
As for VAT, under VAT Law No. 67 of 2016, companies that sell goods or provide services electronically are required to register with the Tax Authority when their annual revenue exceeds EGP 500,000. Similarly, individuals and entities that provide consultancy and professional services are required to register with the Tax Authority from the date of commencement of their activity and pay a VAT of 10 percent. Companies that sell any of the goods or services included in the goods’ list are required to register with the Tax Authority to pay the tax and transfer it to the category corresponding to the provided goods or service as stipulated in the law.
