Egypt – Transfer Pricing (2025)

Legal framework and scope

The arm’s length principle is expressly anchored in Egyptian tax law and supported by implementing regulations. The primary statutory reference is Article 30 of Income Tax Law No. 91 of 2005, with further detail in Articles 38, 39 and 40 of the Executive Regulations attached to that law. The Egyptian Tax Authority (ETA) relies on the OECD Transfer Pricing Guidelines as a basis when issuing the Egyptian Transfer Pricing Guidelines, which serve as practical guidance for applying Article 30 of Income Tax Law No. 91 of 2005.

Arm’s length principle and role of the OECD Guidelines

Egyptian authorities acknowledge and use the OECD Transfer Pricing Guidelines as the main reference. The Egyptian Transfer Pricing Guidelines, issued by Ministerial Decree No. 547 of 2018, adopt the OECD Guidelines as the internationally accepted standard and advise taxpayers to consult them for a more detailed treatment. The Egyptian guidance notes the need to update the local guidelines to reflect BEPS Actions 8–10 and the OECD Guidelines amendments published in January 2022.

Definition of related parties

The domestic definition of related parties is set out in Article 1 of the Executive Regulations of the Unified Tax Procedure Law No. 206 of 2020, issued by Ministerial Decree No. 286 of 2021. A “related party” is any person having a relationship with a taxpayer that affects, directly or indirectly, through management, control or ownership, the determination of the tax base. Two persons are deemed related if the relationship allows one or both to act according to the directions, requests, proposals, or will of the other or a third party. Explicitly included are: spouses, ascendants and descendants; partnerships and their general and limited partners; capital associations and any person owning, directly or indirectly, at least 50% of voting rights, management, dividends or capital rights; and two or more companies in which another person owns or acquires at least 50% of voting rights, management or dividend/capital rights. When applying items 2, 3 or 4, ownership assigned to a person by a related party must not be reassigned to another related party. Mere employment or client relationships do not by themselves create related-party status unless they affect the tax base.

Methods and selection criteria

Transfer pricing methods are listed in Article 39 of the Executive Regulations to the Income Tax Law No. 91 of 2005 and elaborated in “Chapter 4: Pricing Methods” of the Egyptian Transfer Pricing Guidelines (Ministerial Decree No. 547 of 2018). The five classic OECD methods—Comparable Uncontrolled Price (CUP), Resale Price, Cost Plus, Transactional Net Margin Method (TNMM) and Profit Split—are explicitly recognized. The Guidelines also reference Global Formulary Apportionment as an alternative to the arm’s length principle. For method selection the Egyptian guidance follows the “most appropriate method” approach (Section 2.3.2 of the Egyptian Transfer Pricing Guidelines) rather than a strict hierarchical ordering.

Comparability and arm’s length ranges

Egypt follows the OECD comparability framework as set out in Chapter III of the OECD Guidelines. There is a preference for domestic comparables: when the tested party is Egyptian, Egyptian comparables should be sought first; if unavailable, regional comparables from the Middle East and Africa should be considered, and only if those are not available should global comparables be used (Section 5.7.3.1 of the Egyptian Transfer Pricing Guidelines). The ETA does not use secret comparables. The use of arm’s length ranges and statistical measures is permitted under “Chapter 2: Practical Application of the Arm’s Length Principle” of the Egyptian Transfer Pricing Guidelines. Comparability adjustments are required and applied in line with the OECD approach, as set out in “Chapter 4: Pricing Methods” of the Egyptian Transfer Pricing Guidelines.

Documentation and reporting requirements

Transfer pricing documentation obligations are established in Articles 12 and 13 of the Unified Tax Procedure Law No. 206 of 2020 and in “Chapter Five: Documentation and Other Practical Considerations” of the Egyptian Transfer Pricing Guidelines. Taxpayers are required to prepare a master file in line with Annex I to Chapter V of the OECD Guidelines, a local file consistent with Annex II, and a country-by-country report consistent with Annex III. There is no separate TP return form, but the Income Tax Return contains a table (507/508) requiring disclosure of the related party’s name, nature of the relationship, type of transaction, transaction value (current and prior year), transfer pricing method, country of origin and country of the supplier/service provider. Filing deadlines provided by Article 13 are: the master file should be filed by the date the ultimate parent company files its master file with its tax authority; the local file must be filed within two months after the filing of the taxpayer’s annual tax return in Egypt; and the CbCR must be filed within one year following the end of the tax year to which the audit and assessment relate. The profile does not specify language requirements or detailed submission forms; therefore, “No domestic guidance is specifically provided in the profile” for such procedural details and taxpayers should consult the Egyptian Transfer Pricing Guidelines and international practice.

Documentation thresholds and exemptions

Article 12 of the Unified Tax Procedure Law No. 206 of 2020 provides an exemption from the local file obligation for resident entities whose total volume of transactions with related parties during the taxable period does not exceed EGP 8,000,000 (approximately EUR 415,169). There is no threshold for filing the master file. Free zone companies are exempt from filing the local file and master file but are still required to file the CbCR and the notification form. If the parent entity of an MNE Group is resident in Egypt, the parent must file a CbCR if consolidated group revenue equals or exceeds EGP 3,000,000,000. When the parent entity is resident outside Egypt, the international threshold of EUR 750,000,000 applies pursuant to BEPS Action 13; the ETA can obtain CbCR information via exchange-of-information mechanisms.

Penalties and administrative consequences

Article 13 of the Unified Tax Procedure Law No. 206 of 2020 prescribes TP-related penalties. Failure to disclose related-party transactions in the designated section of the tax return results in a penalty equal to 1% of the value of the undisclosed related-party transactions. Failure to submit the local file triggers a penalty equal to 3% of the value of the related-party transactions; failure to submit the master file also triggers a 3% penalty; and failure to submit the CbCR triggers a 2% penalty. In case of multiple violations, the cumulative penalty shall not exceed 3% of the value of the transactions. Further, Article 12 grants the Authority the right to set pricing rules it deems appropriate when required documentation is not filed, without prejudice to the taxpayer’s right to challenge such decisions.

Safe harbours, simplification measures and year-end adjustments

The jurisdiction does not have reported safe harbours or other simplification measures in place. Year-end adjustments are permitted: Article 90 of the Income Tax Law No. 91 of 2005 and Article 43 of the UTP Law No. 206 of 2020 empower the tax administration to modify assessments based on information in the tax return and supporting documents, to notify taxpayers, conduct inspections and correct or amend returns where inconsistency with reality is established. Secondary adjustments are recognized and are supported by the same statutory provisions.

APAs and MAP procedures and timelines

Advance Pricing Agreements are allowed under the Egyptian Transfer Pricing Guidelines. The Guidelines set out that a pre-filing meeting request for a unilateral APA should be submitted at least six months prior to the first day of the proposed covered period. The unilateral APA process typically ranges from 3 to 6 months. Although APAs are permitted, the profile indicates that, to date, no APAs have been put in place. Regarding Mutual Agreement Procedures, Egypt is in the process of issuing MAP guidelines; more details are available in the OECD MAP Profile for Egypt.

Other rules relevant to intangibles, intra-group services and financial transactions

Egyptian Transfer Pricing Guidelines provide limited guidance on intangibles in “Chapter 2: Practical Application of the Arm’s Length Principle” and “Chapter 3: Comparability Analysis” and recommend consulting the OECD Guidelines for a more extensive discussion. There are no domestic special measures for hard-to-value intangibles (HTVI). Outside TP rules, Article 56 of Income Tax Law No. 91 of 2005 prescribes a 20% withholding tax on amounts paid to non-residents by resident companies, individual establishments or non-resident entities having a PE in Egypt, without allowing deduction of costs; the taxable items include returns, interest, royalties and service charges. There is no detailed domestic guidance on intra-group services or simplified approaches for low value-adding services in the profile; taxpayers are directed to the OECD Guidelines. In relation to financial transactions, there is no specific TP guidance, but Articles 24, 52 and 56 of Income Tax Law No. 91 of 2005 impose limitations relevant for tax deductibility of interest: Article 24 lists non-deductible items and specifies that interest paid on loans exceeding double the credit and discount rate declared by the Central Bank of Egypt at the beginning of the calendar year ending the taxation period is not deductible; Article 52(1) disallows deduction of interest when interest expense exceeds four times the average equity per the financial statements, with exemptions for banks, insurance companies and entities practicing financing activity established by ministerial decree.

Cost contribution arrangements

There is no specific legislation on Cost Contribution Agreements in place. The Egyptian Transfer Pricing Guidelines indicate that CCAs, together with issues related to intangibles and controlled services, will be addressed in separate, more detailed guidance planned for future issuance. The analysis of CCAs is also expected to be covered within the APA framework.

Attribution of profits to permanent establishments (PEs)

Egypt does not broadly adopt the Authorised OECD Approach (AOA) for PE profit attribution. The existing tax treaties generally do not include the revised Article 7 of the OECD Model Tax Convention (2010+). Instead, profit attribution to a PE is determined by treaty provisions aligned with paragraph 3 of the UN Model Tax Convention as reflected in approximately 60 treaties: deductible expenses incurred for the PE’s business, including executive and general administrative expenses, are allowed; typically, amounts charged by the PE to the head office or other offices (such as royalties, fees or similar payments) are not taken into account in determining PE profits, with sectoral exceptions such as banking interest treatments.

Conclusion

Egypt has progressively aligned its transfer pricing framework with international standards by enshrining the arm’s length principle in domestic law, issuing Egyptian Transfer Pricing Guidelines that closely follow OECD guidance, and implementing documentation requirements including master file, local file and CbCR with defined filing deadlines and penalties. The statutory framework addresses definitional matters, acceptable methods, comparability principles and administrative remedies such as APAs and MAP development. Remaining areas for further domestic guidance include detailed rules on CCAs, MAP procedural guidance, expanded treatment of HTVI and a formal update of Egyptian Guidelines to fully reflect recent OECD and BEPS developments.

References

For the global OECD country profiles on transfer pricing see https://www.oecd.org/en/topics/sub-issues/transfer-pricing/transfer-pricing-country-profiles.html