Transfer Pricing - Egypt
As a result of the increasing importance of international tax issues in general and transfer pricing in particular, Egypt introduced for the first time new provisions in the Income Tax Law 91 of 2005 (ITL 2005). These provisions concern thin capitalization and transfer pricing.
Transfer pricing in Egypt is governed by article 30 of the ITL 2005 and its Executive Regulations, articles 38, 39 and 40 collectively, in accordance with recent development by Ministerial Decree No. 221 of 2018. Furthermore, articles 12 and 13 of the Unified Tax Procedures Law UTPL 2020 (UTPL 2020) provide specific measures to TP filing and documentation. Article 30 of the ITL 2005 stipulates that prices charged for exchanges of goods and services and financial transactions between associated enterprises should be consistent with the arm’s length price charged for similar transactions that are carried out between independent enterprises.
Article 30 of the ITL 2005 provides the authorization to the Egyptian Tax Authority (ETA) to assess the prices charged for controlled transactions between related parties in accordance with the arm’s length price charged for uncontrolled transactions between independent parties.
On 22 May 2018, the Egyptian government issued Ministerial Decree No. 221 of 2018, amending certain provisions of the Income Tax Law Executive Regulations under Ministerial Decree No. 991 of 2005. This Decree was published in the Official Gazette dated 22 May 2018 and is effective from this date. The definition of “related-party transactions” is amended under article 38 of the Executive Regulations of the ITL 2005. The definition is more specific in relation to the tax authority’s right to verify the application of arm’s length pricing by related persons.