The electronic invoicing system may be used to record transactions that are not genuine and are not supported by an actual sale of goods or the genuine provision of services, with the aim of reducing tax due or creating fictitious expenses or unjustified tax deductions. In such cases, the problem does not lie in the use of the electronic invoice itself, but rather in the lack of authenticity of the transaction it represents and the purpose for which it was issued or used.
Egyptian law does not recognize a single independent offence called «issuing fictitious electronic invoices» with one uniform penalty. The legal characterization depends on the nature of the facts; the conduct may fall within the scope of value added tax evasion, the use of fabricated documents, forgery, or other offences where their legal elements are satisfied.
What Is Meant by a Fictitious Electronic Invoice?
An invoice may be described as non-genuine where it records a transaction that did not actually occur, or contains fabricated material information with the intention of producing an unjustified tax or financial effect.
Practical examples include:
- Issuing an invoice without an actual sale or genuine service: Despite the absence of any corresponding economic transaction.
- Recording an incorrect transaction value: With the intention of inflating an expense, the value of purchases, or deductible tax.
- Using an invoice issued for a fabricated transaction: To establish an unjustified cost or tax deduction.
- Creating a chain of sham transactions: Between multiple entities for the purpose of showing sales and purchases that do not reflect genuine business activity.
- Using another entity’s data without legal basis: Where this is accompanied by recording an incorrect transaction or using that entity’s data in violation of the law.
The fact that a company is inactive or has limited business activity is not sufficient to conclude that every invoice issued by it is fictitious; what matters is the reality of the transaction itself and the documents and facts proving its performance.
Electronic Invoicing and the Obligation to Record a Genuine Transaction
Tax legislation regulates the issuance of invoices and tax documents and the recording of transactions, while Unified Tax Procedures Law No. 206 of 2020 and its amendments has become a fundamental part of the legal framework governing the electronic system.
The purpose of an invoice is not merely to create a digital document, but to record a genuine economic event using data that allows it to be reviewed and linked to the relevant sale or service and the tax due thereon.
Accordingly, the technical validity of an invoice or its acceptance on the system does not, by itself, conclusively establish the legal or tax validity of the underlying transaction.
Fictitious Invoices and Value Added Tax Evasion
Value Added Tax Law No. 67 of 2016 specifies certain forms of tax evasion. These include, pursuant to Article 68, submitting forged or fabricated documents or records for the purpose of avoiding payment of all or part of the tax or schedule tax.
Depending on the facts, improperly deducting or recovering tax may also fall within the scope of tax evasion where the statutory conditions are satisfied.
Accordingly, where a fabricated electronic invoice is used to obtain an unjustified tax deduction or to avoid payment of tax, the proper legal characterization is determined by the forms of tax evasion prescribed by law, rather than merely by the fact that the document was issued electronically.
Is Merely Issuing the Invoice Sufficient to Establish the Offence?
No single rule can answer this question in all cases. The person who issued the invoice may have known that the transaction was fictitious and participated in the scheme, or the invoice may have been created by an employee without management’s knowledge, or based on documents supplied by another party.
Accordingly, the role of each person must be identified: who created the invoice, who approved it, who requested its issuance, who used it in the tax return or tax deduction, and the extent of each person’s knowledge that no genuine transaction existed.
Criminal liability is personal and does not automatically extend to a manager or legal representative merely by virtue of their position.
Buying and Selling Invoices Without Genuine Transactions
One of the most serious practical forms involves agreeing to issue invoices in return for a commission or percentage of their value without any actual supply of goods or services.
In such cases, the relationship between the parties, movement of funds, inventory or alleged service, contracts, exchanged invoices, bank transfers, and the extent to which genuine economic performance exists must be examined.
These elements may reveal that the invoice is nothing more than a document created to generate a fictitious cost or tax deduction. The criminal characterization is then determined in accordance with tax laws and any other provisions applicable to the facts.
Does Using an Inactive Company Automatically Render the Invoice Invalid?
Not necessarily. What matters is not only the status of the Commercial Register or the apparent business activity, but whether the transaction stated in the invoice actually occurred.
However, if the entity has no real business activity, resources, employees, or inventory capable of performing the transactions recorded in its name, these circumstances may constitute important evidence when examining whether the invoices are fictitious, particularly where accompanied by disproportionate financial movements or a chain of reciprocal invoices between related parties.
Do Cybercrime Offences Apply Automatically?
No. The mere use of an electronic system does not mean that the conduct automatically falls under Anti-Cyber and Information Technology Crimes Law No. 175 of 2018.
That Law criminalizes specific technological acts, such as unauthorized access or attacks on data, systems, or accounts in the cases it prescribes. However, creating an invoice containing a fictitious transaction through a valid user account is not, by itself, sufficient to establish a cybercrime unless the elements of one of the offences prescribed by that Law are satisfied.
Accordingly, the automatic link between issuing a fictitious invoice and Article 23 of the Anti-Cyber and Information Technology Crimes Law has been removed; selection of the applicable provision depends on the specific technological conduct, if any.
Electronic Signature and Data Used in the Invoice
If the facts involve using an electronic signature or authentication credentials belonging to another person without authorization, or tampering with the signature or electronic document, independent liability may arise under the laws governing electronic signatures, forgery, or cybercrime, depending on the nature of the conduct.
However, such conduct must be established independently. It is not correct to assume the existence of «digital signature forgery» merely because the invoice records a transaction that is not genuine.
Fictitious Invoices and Forgery
The facts may be connected to a forgery offence where the legal elements of forgery are satisfied in respect of the document forming the subject of the accusation. However, describing every fictitious invoice as a «forged official document» is not universally correct.
The nature of the document, the capacity of the person who created it, the manner in which the truth was altered, and the legal effect it was intended to establish must first be identified before applying the appropriate criminal provision.
Accordingly, forgery should not be used as an automatic substitute for a tax evasion offence.
Can Fictitious Invoices Be Connected to Money Laundering?
They may be, but not merely by virtue of issuing the invoice.
Money laundering under Law No. 80 of 2002 requires the existence of funds or assets derived from a predicate offence, knowledge of that fact, and the commission of one of the acts specified by law with the intention of concealing or disguising the true nature or source of such funds, or for any of the other purposes required by the provision.
Accordingly, fabricated invoices may be used as a means of creating a false commercial justification for movements of proceeds derived from crime, in which case money laundering may be examined. However, tax evasion alone or the mere existence of a fictitious invoice does not automatically establish a money laundering offence.
The Penalty Is Not Determined Solely by the Description «Fictitious Invoice»
There is no uniform penalty for every case involving a non-genuine invoice. If the conduct constitutes value added tax evasion, the penalties prescribed for tax evasion under the provisions in force at the time of the offence apply.
If another offence is also involved – such as forgery, a cybercrime offence, or money laundering – liability for that offence requires independent proof of its legal elements, and the penalty prescribed for that offence applies.
Accordingly, a single sentencing range should not be stated as covering all forms of fictitious invoices, particularly in light of recent amendments to tax legislation during 2025 and 2026.
Does the Conduct Result in Cancellation of Tax Registration or Blacklisting of the Company?
There is no general rule under which issuing a fictitious invoice automatically results in cancellation of tax registration, prohibition from dealing with government entities, or inclusion on a «blacklist».
Specific administrative or tax consequences may arise depending on the provisions and decisions governing the case, and the Egyptian Tax Authority may take measures relating to registration, audit, collection, or criminal referral. However, the legal basis of each measure must be identified separately.
Accordingly, such consequences should not be presented as inevitable penalties attached to every case.
How Is a Fictitious Invoice Detected?
The examination is not limited to the invoice data itself. Invoices may be compared with other elements, including:
- Contracts and supply orders: To verify the existence of a genuine agreement.
- Inventory movements: And whether goods actually entered or left inventory.
- Transportation and delivery documents: Where the transaction concerns goods.
- Bank accounts: And whether genuine consideration exists and the nature of its movement between the parties.
- Workforce and operational capacity: To verify the service provider’s ability to perform the work recorded in the invoice.
- Electronic data: And comparison with invoices, tax returns, and other transactions recorded on tax systems.
- Relationship between the parties: Particularly where reciprocal transactions are repeated without a clear economic justification.
When Is the Recipient of the Invoice Liable?
Potential liability is not limited to the issuer of the invoice. If the recipient uses the invoice knowing that the transaction is fictitious in order to obtain an unjustified tax deduction, refund, or reduction, their conduct may fall within the scope of criminalization depending on the facts and applicable provisions.
However, if a person receives an invoice from a genuine supplier for a transaction that actually occurred and it later emerges that the supplier committed a separate violation unknown to the customer, criminal liability may not be presumed merely because the invoice appears in the customer’s books.
Accordingly, proving the reality of the transaction, good faith, and knowledge of its fictitious nature is of fundamental importance.
Liability of the Manager, Accountant, and Employee
The role of each person must be identified separately. The accountant may only have been responsible for entering data, while the decision to issue the invoice came from management, or the employee may have created it without authorization.
Accordingly, proving a person’s job title or managerial capacity is not sufficient. Knowledge, participation, instructions issued, each person’s authority over the system, and whether they benefited from the transaction or contributed to its use before the Egyptian Tax Authority must all be examined.
What Should Be Examined When Defending a Case Involving Non-Genuine Electronic Invoices?
- Reality of the transaction: Whether the goods or services were actually supplied or performed.
- Supporting documents: Contracts, purchase orders, delivery documents, and account statements.
- Who created the invoice: The account used and the permissions available to that user.
- Purpose of issuance: Whether it was used for a tax deduction, refund, or reduction.
- Knowledge of the accused: And the extent of their awareness that the transaction was fictitious.
- Financial flows: Whether the consideration was genuine or recycled between the parties.
- Legal characterization: Whether the matter concerns tax evasion alone or another independent offence also exists.
- Date of the conduct: To determine the legal provision and penalty in force at the time it was committed.
How Can Companies Reduce the Risk of Non-Genuine Invoices?
- Link every invoice to a documented transaction: Through a contract, purchase order, or appropriate performance document.
- Verify suppliers: Particularly in high-value or unusual transactions.
- Separate issuance and approval permissions: Within the electronic system.
- Review invoices periodically: And reconcile them with inventory, payments, and contracts.
- Record audit trails for amendments: And avoid sharing login credentials or electronic signatures between employees.
- Investigate unusual transactions: Such as high-value invoices without corresponding inventory movements or actual performance.
Conclusion
Issuing an electronic invoice that does not reflect a genuine transaction may give rise to serious tax and criminal liability, but it does not constitute one independent offence with a fixed penalty. The essential issue is to identify the purpose of the invoice, how it was used, and the role played by each party.
If the invoice was used to evade value added tax or to obtain an unjustified deduction or refund, the tax evasion provisions are among the principal rules that must be examined. Forgery, cybercrime offences, or money laundering should not be added to the accusation unless the elements of each offence are independently established.
Accordingly, proper assessment does not begin with the fact that the invoice is «electronic», but with a more precise question: Is there a genuine transaction corresponding to it, who created the incorrect data, how was it used, and what tax or financial effect was intended to be achieved?