Digital Payment and Collection Systems in Egypt- Youssry SalehLaw Firm

The Start of Digital Payment and Collection Systems in Egypt

Zaynab Ismail   12 Feb 2020   1315 Views
The Start of Digital Payment and Collection Systems in Egypt-Youssry Saleh Law Firm

Recently, the Egyptian President and the Parliament approved the issuance of new law that enables the e-payment, with its objective to facilitate wider financial coverage in Egypt, and align with the global trends in adopting policies that reduce the monetary handling, and replace them with banking financial instruments.

Introduction of such Law suggests that the Ministry of Finance aims to switch from the cash payment system to mechanizing the financial transactions through electronic payments system and establishing a unified treasury system to merge the accounts of the Ministry of Finance and its interests in the Central Bank as well as reduce the risk of thefts, bank printing and to help fighting tax evasion and money laundering.

The e-payment and collection system started in Egypt when the Ministry of Finance issued Decree No. 269 of the year 2018 on collection procedures of the government, tax and customs receivables through electronic payment and collection system amended by Decree No. 760 of the year 2018, that stipulates that all payments of all governmental dues, including tax and customs in excess of one hundred thousand pounds, will be through electronic payment and collection system, and may be paid below by check, and prohibits the payment of any amounts provided by these receivables, five thousand pounds. As of May 1, 2019, all governmental dues are to be paid, regardless of their value, by any electronic means of payment through the payment and collection system. The Ministry of Finance can exclude the authorities or the governmental dues, if the mechanisms and procedures required for the electronic collection are not available. On 6th of February 2019, the Ministry of Finance determined the maximum legally admissible cash payment at 500 Egyptian pounds (about $29) for government services[1].

According to Decree No. 18 of the year 2019, companies that all or majority of their capital are owned by the State and private legal persons and establishments of various kinds are obliged to pay the salaries of their employees, experts, chairmen and members of boards of directors, committees and social insurance contributions by means of non-cash payment methods, when the number of employees or  the total value of their monthly wages exceeds the limits as will be stipulated by the Executive Regulation.   The previously mentioned authorities are required to pay the following through the e-payment system as long as the amount are more than that will be specified in the Executive Regulations of the Law:

  • Payment of the dues of suppliers, contractors, service providers and other contractors;
  • Granting cash financing;
  • Distribution of profits resulting from the contribution to the capital of companies or investment funds;
  • Payment of dues of members of syndicates and entitlements of participants in special insurance funds and insurance compensation;
  • The disbursement of subsidies and donations by associations and institutions working in the field of civil work, or other legal persons or establishments;
  • Payment of the consideration in cases of purchase or lease, independence, or use of land, real estate or express transport vehicles by the authorities and organs of the State, legal persons and enterprises.

Moreover, natural and legal persons are involved in the digital payments activity by paying taxes, customs, duties, fines, cash payments, insurance fees, syndication subscriptions, private insurance, fund contributions, donations and subsidies made by charities and charitable organizations, sales and lease cases and services provided by different entities and organs of the State. However, the Executive Regulations of this Law will determine the amounts that will be paid electronically. A decision by the Prime Minister on the proposal of the Minister of Finance and the approval of the Chairman of the Central Bank may add additional payments to be paid by means of non-cash payment. The authorities and organs of the State, and public legal persons dealing with the public, with the approval of the Minister of Finance, may grant positive incentives for payment by non-monetary means of payment, including a reduction in the amount paid to it or a part thereof.  The executive regulations of this law shall determine the manner and rules of granting such incentives. 

Each and every person who violates Articles 2, 3 and 5 of the Decree No. 18 of the year 2019 shall be liable to a fine not less than 2% (two per cent) of the value of the amount paid and shall not exceed 10% (ten per cent) of the value of this amount, and up to a maximum of one million pounds. Moreover, whoever violates Article 4 of this Decree shall be liable to a fine not less than 100,000 EGP (one hundred thousand Egyptian pounds) and not exceeding 300,000 EGP (three hundred thousand Egyptian pounds), and the fines shall be doubled in case of return.  Without prejudice to the criminal liability of natural persons, the person responsible for the actual management and acts of the legal person especially, if that person is proved guilty of knowledge of the illegal act. The proceeds of the fines provided for in this Law shall be transferred to an account dedicated to the Ministry of Finance’s unified treasury account, which shall be allocated to support the efforts of providing the infrastructure of non-monetary means of payment to the governmental bodies.  As defined in the executive regulations of this law, provided that the surplus of the funds of this account shall be transferred from one fiscal year to another.

The Ministry of Finance is currently installing POS machines in preparation for the completion of the deployment of approximately 22 thousand electronic collection points in government authorities by the end of April 2019. These machines are linked to the Electronic Payment and Collection Center at the Ministry of Finance, at no additional costs. Most people will be afraid of dealing with the POS machines as errors might occur but the Ministry of Finance has already taken this into consideration by issuing Circular Book No. 43 of the year 2019 on the required procedures in case errors occurred to the e-payment and collection systems, where it provides several ways of reporting the error and its solution. Moreover, the banks begun to establish electronic wallets for such payments so that it facilities the applying of such acts by the individuals.

The Ministry as well facilitated the implementation of the new law to be applied in phases through the reconciliation period, which shall take six months from the date of issuance of the Executive Regulations of Law No. 18 of 2018. The first phase includes the start of the consultation, negotiation and the selection of the non-cash payment providers to be contracted for payments and receipts, in case the customer does not have an existing bank account or other non-cash payment methods such as credit and debit cards, mobile payments, and prepaid cards. This is followed by phase 2, which is the transition to the stage of contracting with non-cash payment providers, and obtaining the prior approval of the Authority, which is only required for those licensed to practice the microfinance activity, in order to activate non-cash payment transactions for its customers. Moving to phase 3, which is the pilot operation of all non-cash payment services and the initiation of an awareness plan for customers and stakeholders. Then phase 4 is the initiation of the implementation of non-cash collection of the entity’s payments. Phase 5 is the start of non-cash payments / disbursements to the entity’s payments, and finally the full compatibility of all payments (payment and collection) by means of non-cash payment and fixing all obstacles.[2] This will not cost the citizen any financial burdens or additional costs.

One of the objectives of the plan is to enable the Egyptian society to become a digital society like the world’s largest countries, explaining the importance of this law is to provide the legislative environment necessary to cross the Egyptian economy to the non-monetary economy, growth and progress and development. As well as to manage public facilities, to provide its customers with means of acceptance of non-cash payment at all collection points for service, adding to that the Law aims to facilitate citizens to pay their financial obligations, and facilitate the transfer of funds efficiently and effectively, and contributes to reducing corruption and eliminating bureaucracy.

[1] David Awad, Egypt switches to digital payments, 2019 <https://www.al-monitor.com/pulse/originals/2019/04/egypt-electronic-payments-law-government-taxes.html> 10/07/2019.

[2] Circular Book No. 2 of the year 2019

Zaynab Ismail- corporate lawyer in Egypt

Zaynab Ismail

Attorney at law

Z