Law Addresses Non-Cash Payments

February 20, 2020


Partner at Hassouna & Abou Ali Law Firm

On April 16,2019, the Egyptian Parliament issued for the first time a law regulating non-cash payment methods. Law No.18 defines a non-cash payment method as any process “resulting in a credit to a bank account of a beneficiary, including deposits, transfers and debit orders, credit and debit cards, payments by mobile or other methods approved by the governor of the Central Bank of Egypt.”

Although Law 18 requires the Prime Minister to issue executive regulations within six months of issuance, it has been nearly 10 months and they have not yet been issued. As a result, private sector entities and companies are still not obligated to follow the law.

Law 18 is implemented by various arms in the Ministry of Finance, including Tax and Customs authorities. It also requires eligible entities to comply with its rules within six months from the issuance of executive regulations.

Pursuant to Law 18, all government entities, public authorities and companies where the state owns all or a majority of their capital must use non-cash methods to pay their employees, experts, board members, and social insurance benefits. These entities also are obligated to pay using a non-cash method if the payment value exceeds certain limits set by the executive regulations. They include specified payments, including those to suppliers and contractors; cash loans; dividends distributed by companies and investment funds; and purchase or rental of real estate or vehicles, among others.

With some exceptions, government entities providing public services must use non-cash payment methods to the public free of charge. The law further mandates that certain payments must be cashless, including taxes, customs duties and fines; dues of governmental entities; financing installments; insurance policies; syndicate subscriptions; and donations received by NGOs.

Violators face a fine equal to between 2 and 10 percent of the payable amount with a maximum of EGP 10 million (Articles 2, 3, 5 of Law 18). A fine ranging from EGP 100,000 to EGP 300,000 would be imposed on whoever does not use non-cash payment methods. Fines are doubled in the event of repeat violations. Individuals in charge of the actual management of an entity subject to Law 18 may be charged with the same penalties if they had knowledge of the violation and participated in the crime.

The law specifies that the executive regulations would set eligibility criteria.

It is evident the government wishes to apply the law in a gradual manner. However, there is concern that individual action by each governmental authority in addressing the implementation of the legislation may result in hampering the desired effects of the law. The sooner the executive regulations are issued, the sooner the realization of the intended benefits of the law are likely to be achieved.

Another concern relates to the readiness of necessary elements required for the initiative to succeed, such as the number of individuals who do not own bank accounts or bank credit or debit card; the need for expanding the number of bank branches; and the fact that the availability of non-cash payments remains limited to prepaid cards, credit cards, and bank accounts.