Egypt: Amendment In Accepted Methods Of Transfer Pricing & Amendment In The Methodology Of Submitting The Corporate Tax Return

Last Updated: 19 November 2018
Article by Ahmed Ali
Most Read Contributor in Egypt, August 2019

Decree 221 of 2018

Amendment to Executive Regulation provisions for Income Tax Law, issued by the Minister of Finance in decision No. 991 of 2005.


  1. Income Tax Law No. 91 of 2005 was introduced on the 9th of June 2005, and its Executive Regulation on the 27th of December 2005.
  2. This law and its executive regulations underwent several amendments over the prior period.
  3. Below you will find the latest amendments for the sections of the executive regulation related to Income Tax Law No. 91 of 2005, put in place through the issuance of decree No. 221 of 2018 on 22nd of May 2018 from the Minister of Finance, which also included replacements for articles No. 38 and 39, 40 and 104 of the Executive Regulations.

Summary of Amendments:

A – Amendment in Accepted Methods of Transfer Pricing:

  1. Egyptian Government's consideration of related party transactions and transfer pricing (TP). Generally, this topic has been covered by article 30 of Income Tax Law since 2005, in addition to some formal TP guidelines which were issued by the Egyptian Tax Authority (ETA) in 2010. Recently, there is a strong tendency from the Ministry of Finance, represented by ETA, to review the transactions between related parties in order to ensure that the Egyptian tax is properly calculated, and that profits are not transferred to entities that are not subject to tax in Egypt, or are exempted from its payment.
  2. Decree 221/2018 introduced a new amendment which permits the taxpayer to choose an appropriate TP method according to the nature of the financial or commercial transactions and conditions of dealing without being bound by a priority of methods. Prior to this there was a priority to apply three particular methods (Comparable Uncontrolled Price method "CUP", Cost Plus method "CP" and Resale Price Method "RPM"), however new methods are now accounted for (Profit Split method "PS" and Transactional Net Margin Method (TNMM) and there are no obligations regarding the order of their application. The taxpayer can choose other methods if this is previously agreed upon with ETA.
  3. A new TP guideline is expected to be issued by the Minister of Finance, which will include the application of transfer pricing methods according to article 30 of the law, as well as the books and documents which are necessary to maintain.

B – Amendment in the Methodology of Submitting the Tax Return:

  1. The tax return of the juridical person must be submitted electronically through the e-government portal, which requires contacting the ETA to register and obtain a password. Moreover, only natural persons have the choice to submit the tax return either electronically or manually to the ETA.

Amendment details:

Executive Regulation Article (38):

The Egyptian Tax Authority shall verify the application of arm's length principal between related parties. 'Trade or financial transactions between related parties' were added to the aforementioned decree, in particular the exchange of goods and services, the distribution of joint expenses, royalties, returns and other commercial or financial transactions between them.

Executive Regulation Article (39):

The neutral price stipulated in article (30) of the Law shall be determined according to any of the following methods:
1. Comparable uncontrolled price method (CUP)
2. Cost plus method (CP)
3. Resale price method (RPM)
In addition to two new methods:
4. Profit split method (PS)
5. Transactional net margin method (TNMM)

Executive Regulation Article (40):

There is no obligation on the taxpayer to follow a specific method. Taxpayers have the right to choose any of the previous methods according to the nature of the financial or commercial transaction, and the working conditions.

Furthermore, if these methods cannot be applied, the taxpayer may choose any other method as long as they provide the financial books and documents supporting the appropriateness of this method.

The Minister of Finance shall issue a guide upon the application of article (30) of the law, which will include how to apply the transfer pricing methods, the conditions which should be taken into consideration when applying each method, and the books and documents to be maintained. This should be the official guide for the Egyptian Tax Authority to refer to upon reviewing the arm's length principal. Deviation from the guide is not permitted except at the taxpayer's request, and after obtaining the approval of Head of the Egyptian Tax Authority.

Article (104) of executive regulation:

The taxpayer is obligated to send the tax return through the e-government portal (income taxpayers' service) or through any other electronic channel specified by the Ministry of Finance. The taxpayer should register himself and obtain his password. The taxpayer is fully responsible for any submitted document and must sign an acknowledgment or submit an electronic signature authorized by the tax authority before utilizing this service.

Moreover, taxpayers (natural persons) may submit the tax return as stated in the preceding paragraph. In all cases, the taxpayer must provide payment evidence of the tax due, using one of the approved means of payment provided for in Article (82) of these regulations, or determined by the Ministry of Finance.

The submission of the tax return using any of the methods referred to in this Article is equivalent to submitting a tax return to the concerned tax office.

Responsibility & Commitment:

Andersen Tax & Legal Egypt's tax team has prepared this summarized tax report to introduce Decree 221 of 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.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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