- Updated
- June 2022
- Sections
- 13
- Questions
- 33
Key Facts
Core Framework
Article 30 of Income Tax Law No. 91 of 2005 Articles 38, 39 & 40 of the Executive Regulations attached to the mentioned Law
The Egyptian Tax Administration (ETA) relies on the OECD guidelines as a reference to issue the Egyptian Transfer Pricing Guidelines as a guide to the application of Article 30 of the Income Tax Law No. 91 of 2005.
The OECD TP Guidelines has been used as a reference to issue the Egyptian Transfer Pricing Guidelines.
Section 5.7.3.1 of the Egyptian Transfer Pricing Guidelines
As stated in the Egyptian Transfer Pricing Guidelines, “if the tested party for which comparables are being searched is an Egyptian entity, it is recommended that Egyptian comparables are first searched for. When data on Egyptian comparables is not available, regional (i.e. Middle Eastern and African) comparables may be searched for instead. When Middle Eastern and African comparables cannot be located, global comparables may then be searched for.”
“Chapter 2: Practical Application of the Arm’s Length Principle” of Egyptian Transfer Pricing Guidelines, issued by Ministerial Decree No. 547 of 2018
Documentation
Article 90 of the Income Tax Law No. 91 of 2005 and Article 43 of the UTP Law No. 206 of 2020
Yes. Please refer to the answer to Question 28 above.
Article 90 of the Income Tax Law No. 91 of 2005 and Article 43 of the UTP Law No. 206 of 2020
Yes. Please refer to the answer to Question 28 above.
Article 90 of the Income Tax Law No. 91 of 2005 and Article 43 of the UTP Law No. 206 of 2020
Yes. Please refer to the answer to Question 28 above.
The treaties do not include the new version of Article 7; based on the Articles stated in the 60 tax treaties (with reference to paragraph 3 of the UN Model Tax Convention), to determine the profits of a PE: There shall be allowed as deductions expenses which are incurred for the purposes of the business of the permanent establishment including executive and general administrative expenses so incurred, and not allowed any paid by the permanent establishment to the head office... except in the case of a banking enterprise (interest on moneys lent to the permanent establishment). No account shall be taken... for amounts charged by the permanent establishment to the head office... except in the case of a banking enterprise.
TP Methods
- CUP
- Resale Price
- Cost Plus
- TNMM
- Profit Split
- Other
Selection: Most appropriate method
Dispute Resolution
The Egyptian Transfer Pricing Guidelines stated that although Egypt is not a member country of the OECD, the OECD Transfer Pricing Guidelines are acknowledged as an important guide. ETA used the OECD TPG as a basic reference. Egyptian Transfer Pricing Guidelines should be updated to encounter the aspects of Actions 8-10 and the changes reflected in the OECD Transfer Pricing Guidelines that was issued in January 2022. Egypt is in the process of preparing a set of executive instructions to be issued in the form of ETA circular letter.
The Egyptian Transfer Pricing Guidelines stated that although Egypt is not a member country of the OECD, the OECD Transfer Pricing Guidelines are acknowledged as an important guide. ETA used the OECD TPG as a basic reference. Egyptian Transfer Pricing Guidelines should be updated to encounter the aspects of Actions 8-10 and the changes reflected in the OECD Transfer Pricing Guidelines that was issued in January 2022. Egypt is in the process of preparing a set of executive instructions to be issued in the form of ETA circular letter.
Simplifications
Special Topics
“Chapter 2: Practical Application of the Arm’s Length Principle” and “Chapter 3: Comparability Analysis” of Egyptian Transfer Pricing Guidelines, issued by Ministerial Decree No. 547 of 2018
The Egyptian TPG contain limited guidance regarding intangibles. It is highlighted that in the case of intangible property, it is important to examine the form of transaction (e.g. licensing or sale), type of intangible (patent, trademark, or know-how), duration and degree of protection, and the anticipated benefits from the use of the property. Furthermore, it is stated in the Egyptian TPG that the OECD Transfer Pricing Guidelines should be consulted for a more detailed discussion of the principles.
Article 56 of the Income Tax Law No. 91 of 2005
Article 56 of Law 91 of year 2005 states that amounts paid to non-residents in Egypt by owners of individual establishments, corporate bodies resident in Egypt and by non-residents entities having permanent establishments in Egypt shall be taxable at a rate of 20% without deducting any costs from them. These amounts include yields and interests, royalties, charges for services, etc.
Articles 13 of the Unified Tax Procedure Law No. 206 of 2020
Non-compliance results in an amount equal to: 1% of the value of transactions for failure to disclose in the tax return; 3% for failure to submit the local file; 3% for failure to submit the master file; 2% for failure to submit the CbCR. The total amount may not exceed 3% of the value of transactions in case of multiple violations.
Full OECD Questionnaire
Legal ReferenceArticle 30 of Income Tax Law No. 91 of 2005 Articles 38, 39 & 40 of the Executive Regulations attached to the mentioned Law
The Egyptian Tax Administration (ETA) relies on the OECD guidelines as a reference to issue the Egyptian Transfer Pricing Guidelines as a guide to the application of Article 30 of the Income Tax Law No. 91 of 2005.
Legal ReferenceArticle 1 of the Executive Regulations of the Unified Tax Procedure Law No 206 of 2020 issued by Ministerial Decree No. 286 of 2021
Article 1 of the Executive Regulations of the Unified Tax Procedure Law No. 206 of the 2020 amended by Law No. 211 of 2020 defines related party as follows: Related party: shall mean any person having a relationship with a taxpayer, and that relationship affects, directly or indirectly, either through management, control or ownership, the determination of the tax base. Generally, the two persons shall be deemed to be related parties if the relationship between them allows for one party or both parties to make dispositions according to the directions, requests, proposals, or will of the other party or a third party; The following persons shall be treated as related parties: 1. The husband, wife, ascendants and descendants, or inter se; 2. Partnerships, general partners and limited partners therein; 3. Associations of capital and the person who owns, directly or indirectly at least 50% of the voting rights or management of the corporation or the dividends or capital rights; and 4. Any two or more companies in which another person owns or acquired at least 50% of the voting rights or management of the two companies, or of their dividends or capital rights. When applying items 2, 3, or 4 of the preceding paragraph, the ownership or acquisition assigned to a person by a related party may not be assigned to another related party. Two persons shall not be deemed related parties merely on the ground that one of them is considered an employee or a client of the other person or both persons are considered an employee or a client of a third party, unless such relation affects, directly or indirectly, the determination of the tax base.
Legal ReferenceArticle 39 of the Executive Regulations of the Income Tax Law No. 91 of 2005 “Chapter 4: Pricing Methods” of Egyptian Transfer Pricing Guidelines, issued by Ministerial Decree No. 547 of 2018
The five methods are listed in the Executive Regulations of the Income Tax Law No. 91 of 2005 and the Transfer Pricing Guidelines (A guide to the application of Article 30 of the Income Tax Law No. 91 of 2005). The Global Formulary Apportionment Method is stated as an alternative to the arm’s length principle as a means of determining the proper level of profits across national taxing jurisdictions.
- CUP (provided)
- Resale Price (provided)
- Cost Plus (provided)
- TNMM (provided)
- Profit Split (provided)
- Other (provided)
Legal ReferenceSection 2.3.2 of the Egyptian Transfer Pricing Guidelines
Most appropriate method
- Hierarchy of methods (not selected)
- Most appropriate method (selected)
- Other (if so, please explain) (not selected)
Legal ReferenceSection 4.4.1 of the Egyptian Transfer Pricing Guidelines
For controlled transactions involving commodities, the guidance contained in paragraphs 2.18-2.22 of the TPG is followed.
- For controlled transactions involving commodities, the guidance contained in paragraphs 2.18-2.22 of the TPG is followed. (selected)
- Domestic legislation mandates the use of a specific method for controlled transactions involving commodities (if so, please explain) (not selected)
- Other (if so, please explain) (not selected)
The OECD TP Guidelines has been used as a reference to issue the Egyptian Transfer Pricing Guidelines.
Legal ReferenceSection 5.7.3.1 of the Egyptian Transfer Pricing Guidelines
As stated in the Egyptian Transfer Pricing Guidelines, “if the tested party for which comparables are being searched is an Egyptian entity, it is recommended that Egyptian comparables are first searched for. When data on Egyptian comparables is not available, regional (i.e. Middle Eastern and African) comparables may be searched for instead. When Middle Eastern and African comparables cannot be located, global comparables may then be searched for.”
Legal Reference“Chapter 2: Practical Application of the Arm’s Length Principle” of Egyptian Transfer Pricing Guidelines, issued by Ministerial Decree No. 547 of 2018
Legal Reference“Chapter 4: Pricing Methods” of Egyptian Transfer Pricing Guidelines, issued by Ministerial Decree No. 547 of 2018
The Egyptian TPG follows the OECD TPG with respect to the comparability adjustments.
Legal Reference“Chapter 2: Practical Application of the Arm’s Length Principle” and “Chapter 3: Comparability Analysis” of Egyptian Transfer Pricing Guidelines, issued by Ministerial Decree No. 547 of 2018
The Egyptian TPG contain limited guidance regarding intangibles. It is highlighted that in the case of intangible property, it is important to examine the form of transaction (e.g. licensing or sale), type of intangible (patent, trademark, or know-how), duration and degree of protection, and the anticipated benefits from the use of the property. Furthermore, it is stated in the Egyptian TPG that the OECD Transfer Pricing Guidelines should be consulted for a more detailed discussion of the principles.
There is no special measure or provision for HTVI, but it is stated in the Egyptian TPG that the OECD Transfer Pricing Guidelines should be consulted for a more detailed discussion of the principles.
Legal ReferenceArticle 56 of the Income Tax Law No. 91 of 2005
Article 56 of Law 91 of year 2005 states that amounts paid to non-residents in Egypt by owners of individual establishments, corporate bodies resident in Egypt and by non-residents entities having permanent establishments in Egypt shall be taxable at a rate of 20% without deducting any costs from them. These amounts include yields and interests, royalties, charges for services, etc.
It is stated in the Egyptian TPG that the OECD Transfer Pricing Guidelines should be consulted for a more detailed discussion of the principles.
It is stated in the Egyptian TPG that the OECD Transfer Pricing Guidelines should be consulted for a more detailed discussion of the principles.
Legal ReferenceArticle 56 of the Income Tax Law No. 91 of 2005
Article 56 of Law 91 of year 2005 states that amounts paid to non-residents in Egypt by owners of individual establishments, corporate bodies resident in Egypt and by non-residents entities having permanent establishments in Egypt shall be taxable at a rate of 20% without deducting any costs from them. These amounts include yields and interests, royalties, charges for services, etc.
It is stated in the Egyptian TPG that the OECD Transfer Pricing Guidelines should be consulted for a more detailed discussion of the principles.
Legal ReferenceArticles 24, 52 and 56 of the Income Tax Law No. 91 of 2005
Article 24 Income Tax Law No. 91 of 2005 states that: The following shall not be regarded as deductible costs & expenses: Reserves and provisions of whatever kind; Financial penalties imposed on the taxpayer as a result of committing criminal violation; Income tax due according to this Law; Interest paid on loans exceeding double of credit and discount rate declared by Central Bank of Egypt; Interests on loans and debts of whatever kind paid to corporate bodies who are not subject to tax or exempted from them. Article 52 paragraph 1 states that debt interests paid by corporate bodies on loans and advances obtained for amounts exceeding quadruple of the average of the equity shall not be considered as deductible costs. Article 56 states that amounts paid to non-residents (yields, interests, etc.) shall be taxable at a rate of 20% without deducting any costs.
Legal ReferenceEgyptian Transfer Pricing Guidelines, issued by Ministerial Decree No. 547 of 2018
It was stated in the Egyptian Transfer Pricing Guidelines that the arm’s length principle to transactions involving intangible property, controlled services and Cost Contribution Arrangements (CCAs) will be addressed in separate Guidelines to provide the in-depth practical guidance required by taxpayers for an appropriate application of the principles. Thus, it is planned to have guidelines for the cost contribution agreements. Moreover, analysis of cost contribution agreements is included in the Advance Pricing Agreements.
Legal ReferenceArticles 12 and 13 of the Unified Tax Procedure Law No. 206 of 2020 “Chapter Five: Documentation and Other Practical Considerations” of Egyptian Transfer Pricing Guidelines, issued by Ministerial Decree No. 547 of 2018
There is no specific tax return form for transfer pricing. However, there is a table (507/508) in the Income Tax Return that has to be completed specifying information such as name of related party, nature of relationship, type and value of transaction, TP method, and country of origin/supplier.
- Master file consistent with Annex I to Chapter V of the TPG (selected)
- Local file consistent with Annex II to Chapter V of the TPG (selected)
- Country-by-country report consistent with Annex III to Chapter V of the TPG (selected)
- Specific transfer pricing returns (separate or annexed to the tax return) (not selected)
- Other (specify): Specific fields in the Income Tax Return (selected)
Legal ReferenceArticles 12 and 13 of the Unified Tax Procedure Law No. 206 of 2020
Article 12 requires filing of Master file, Local file, and CbCR. Article 13 filing deadlines: a) Master file: by the date of filing with the tax administration by the ultimate parent company in its country of residence; b) Local file: within two months from the date of filing the annual tax return in Egypt; c) CbCR: within one year following the end of the tax year to which the tax audit and assessment relate.
Legal ReferenceArticles 13 of the Unified Tax Procedure Law No. 206 of 2020
Non-compliance results in an amount equal to: 1% of the value of transactions for failure to disclose in the tax return; 3% for failure to submit the local file; 3% for failure to submit the master file; 2% for failure to submit the CbCR. The total amount may not exceed 3% of the value of transactions in case of multiple violations.
Legal ReferenceArticle 12 of the Unified Tax Procedures Law No. 206 of 2020
Entities whose total volume of transactions with related parties does not exceed EGP 8 million are exempt from submitting the local file. Free zone companies are exempt from local and master files but must submit CbCR and notification. For CbCR, the threshold is EGP 3 billion for Egypt-resident parents, or EUR 750 million for parents in other jurisdictions.
Legal ReferenceEgyptian Transfer Pricing Guidelines, issued by Ministerial Decree No. 547 of 2018, Article 14 of the executive regulations of the UTP Law No. 206 of 2020 “Chapter 2 of Part two: Applying for a Unilateral APA” of the Egyptian Transfer Pricing Guidelines, issued by Ministerial Decree No. 547 of 2018 Egypt's OECD MAP Profile
The APA is allowed according the Egyptian TP Guidelines. The pre-filing meeting request for a unilateral APA should be made at least six months prior to the first day of the proposed covered period. Up till now there is no APA in place. Egypt is in the process of issuing MAP guidelines.
- Rulings (not selected)
- Enhanced engagement programs (not selected)
- Advance Pricing Agreements (APA) (selected)
- Mutual Agreement Procedures (selected)
- Other (please specify): (not selected)
Legal ReferenceArticle 90 of the Income Tax Law No. 91 of 2005 and Article 43 of the UTP Law No. 206 of 2020
It is stated in the Egyptian Income Tax Law and the Unified Tax Procedure Law that the administration may modify the assessment based on the data mentioned in the tax return and the documents and if the administration has documents establishing the non-conformity of the tax return to reality, it shall notify the taxpayer, perform an inspection, correct or amend the tax return and determine the taxable revenues.
Legal ReferenceArticle 90 of the Income Tax Law No. 91 of 2005 and Article 43 of the UTP Law No. 206 of 2020
Yes. Please refer to the answer to Question 28 above.
Legal ReferenceEgyptian Tax Treaties
The treaties do not include the new version of Article 7; based on the Articles stated in the 60 tax treaties (with reference to paragraph 3 of the UN Model Tax Convention), to determine the profits of a PE: There shall be allowed as deductions expenses which are incurred for the purposes of the business of the permanent establishment including executive and general administrative expenses so incurred, and not allowed any paid by the permanent establishment to the head office... except in the case of a banking enterprise (interest on moneys lent to the permanent establishment). No account shall be taken... for amounts charged by the permanent establishment to the head office... except in the case of a banking enterprise.
The Egyptian Transfer Pricing Guidelines stated that although Egypt is not a member country of the OECD, the OECD Transfer Pricing Guidelines are acknowledged as an important guide. ETA used the OECD TPG as a basic reference. Egyptian Transfer Pricing Guidelines should be updated to encounter the aspects of Actions 8-10 and the changes reflected in the OECD Transfer Pricing Guidelines that was issued in January 2022. Egypt is in the process of preparing a set of executive instructions to be issued in the form of ETA circular letter.
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