Tax requirements related to Internal control standards for ERP systems

Tax Alert 107

Egyptian Minister of Finance has issued on 8th October 2018 of new decree 542/2018 to organize and announce the internal control standards for ERP systems.
These standards have to be available under certain to let the tax authority rely on the output for ERP systems.

This has been issued matching with article (78) of Income Tax Law 91/2005 and article (13) of Value Added Tax Law (VAT) 67/2016, and its executive regulation, the tax authority has the right to perform ERP systems inspection to ensure the standard quality of the ERP systems.

This table represents the 12 standards mentioned and divided into three groups:

Category No. of standard Name of standard
General Controls 1 Segregation of Duties
2 Program based documentation
3 Control for electronic assets
4 Control and security for ERP system access
Application Controls 5 Input Controls
6 Processing Control
7 Output Control
Financial Reporting and Tax controls 8 General provisions
9 Control for general accounting applications
10 Control for sales applications
11 Control for purchases applications
12 Control for Inventory applications

Aim for each Standard:

  • Segregation of Duties: This standard aims to segregate the duties by each employee in each job in order to avoid fraud.
  • Program based documentation: This standard aims to provide written descriptions for the system in order to act as guideline to operate more efficient.
  • Control for electronic assets: This standard aims in keeping the date safe by having strong software and backups in order to keep data safe.
  • Control and security for ERP system access: This standard aims to secure the data in order to make it accessible only for the correct people.
  • Input controls: This standard aims to update all the documents, and also restricts the access on it by not adding, deleting or amending any unauthorized data on it.
  • Processing Control: This standard aims to link all the transactions and statements, in order to make all the transactions connected and matched with each other. In addition to, performing in data processing needed.
  • Output Control: This standard aims to give only the eligible people access on this control in order to keep it safe.
  • General provisions: This standard aims to determine the minimum requirements that should be practical and available in the system.
  • Control for general accounting applications: This standard is the important standard for the core of the system, it links all the legal books and the accounting transactions with each other, in order to issue final trial balance.
  • Control for Sales applications: This standard aims to ensure that all the transactions and data related to sales are correct without any misstatements.
  • Control for purchases applications This standard aims to ensure that all the transactions and data related to purchases are correct without any misstatements.
  • Control for Inventory applications: This standard aims to ensure that all the transactions and data related to inventory are correct without any misstatements, in terms of its quantities, prices and descriptions of the item.

Responsibility and Commitment:

Andersen Tax & Legal Egypt’s tax team has prepared this summarized tax report to introduce Decree 542/2018.Efforts have been combined to produce this report with clear and accurate content however this report aims only to spread general information and should not be treated as a legal document or a document that can be used for decision making, or for issuing specialized consultations. Please contact Andersen Tax & Legal Egypt for tailor made solutions.


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