July 26, 2018
From Egypt: Amendment to Executive Regulation Provisions for Income Tax Law
Amendment in Accepted Methods of Transfer Pricing:
- 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 exempt from its payment.
- 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.
- 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.
Amendment in the Methodology of Submitting the Tax Return:
- 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.
Please click here to read more about the mentioned law.