Egypt: Updated Summary of Transfer Pricing in Egypt

This circular sets out the views of the Egyptian Tax Authority (ETA) on the application of transfer pricing rules according to Article 30 of Income Tax Law No. 91 of 2005 (referred to in these guidelines as the "Law") and Articles No. 38, 39 and 40 of the Executive Regulations thereof.

Scope of Guidelines

These Guidelines shall be used for the purposes of the application of Article no. (30) of the law. They therefore apply to transactions between associated enterprises resident in Egypt, as well as to transactions between enterprises resident in Egypt and their non-resident associated enterprises.

Law Provisions

Article (30): “If associated enterprises have set conditions for their commercial or financial transactions other than those operative among independent enterprises, and such conditions led either to reduce the tax base or shift the tax burden from a taxable enterprise to an exempt or non-taxable one, ETA is entitled to determine the taxable profit on the basis of the arm's length price.

The Executive Regulations

Article (38): "ETA has the right to verify the associated enterprises’ application with regard to the arm’s length price in their transactions with regard to the exchange of goods, services, raw materials, capitalized equipment, and the distribution of shared expenses, royalty, interests and other commercial or Fiscal transactions that are carried out between them.”

Article (39): "The arm's length price is specified, as stipulated in Article (30) of the law, according to one of the following methods:

1. Comparable Uncontrolled Price Method (CUP)
2. Cost Plus Method (CPM)
3. Resale Price Method (RPM)
    

Article (40): “The Comparable Uncontrolled Price (CUP) method has the first priority in the determination of the arm’s length price, and in this case the required data available to apply such method, either of two methods prescribed in the preceding Article shall be applied.

If you wish to discuss these topics, please contact:

WTS Egypt LLC