Egypt has updated its transfer pricing guidelines
as a result of a collaborative initiative between the Egyptian Ministry of
Finance, the OECD’s Centre for Tax Policy and Administration (CTPA) and the
African Tax Administration Forum (ATAF).
The updated “Egyptian Transfer Pricing
Guidelines”
replace those issued in 2010 and will serve
as a practical guide to the application of
Article (30) of the Income Tax Law No.91 of 2005, to supplement the existing
legislation and regulations.
The release of the updated Guidelines in Ocotber
2018 has been part of the series of tax reforms which Egypt has embarked on
over the past couple of years, guided by the objective of setting a stable and
clear tax policy to attract investments, create employment opportunities, and
support growth. The following principles have been a key priority on Egypt’s
Tax Reform Agenda:
- Broadening
the tax base by modernising Egypt’s current tax legislation and policies
in line with international best practices, including enhancing
transparency, and combating tax avoidance, fraud and aggressive planning.
- Improving
effectiveness and efficiency of the tax system by simplifying, automating
and streamlining tax procedures as well as by reducing compliance cost.
- Enhancing
tax administration and upgrading skills and capabilities, through the
implementation of an ambitious “Tax Administration Modernisation” project.
- Aligning
the Tax Reform Agenda with “international best tax practices” which has
been a key guiding principle for Egypt.
Egypt has strong partnerships in the
international tax area. In May 2016, Egypt joined the Inclusive Framework on
Base Erosion and Profit Shifting (known as ‘BEPS’), working with other member
countries on an equal footing to tackle tax avoidance. Egypt is also a member of
ATAF, which drives the tax agenda on the African continent.
The European Union (‘EU’) is an important partner
to Egypt. The EU Delegation in Egypt has provided resources for a tailor-made
support programme for Egypt (‘Enhancing domestic resource mobilisation in Egypt
through a better tax and exchange of information system’) in the implementation
of the new international tax standards. The programme is a joint exercise of
the Global Forum and OECD's Centre for Tax Policy and Administration (CTPA) in
collaboration with ATAF.
In-line with Egypt’s Tax Reform Agenda, the
programme aims at assisting Egypt in the following areas:
- Improving
capacity to counter cross-border tax evasion and tax avoidance, and to tax
multinationals fairly and effectively;
- Creating
a predictable business environment for multinationals, in accordance with
internationally agreed tax principles, to encourage cross-border trade and
investment;
- Creating
a clearer understanding by taxpayers of the requirements for them to
comply with Egypt's international tax rules;
- Developing
a technical transfer pricing skill base to support transfer pricing
capacity building in Egypt to address BEPS;
- Taking
well-informed tax policy decisions with the help of internationally
comparable Revenue Statistics data.
As a member of the Inclusive Framework on BEPS,
Egypt has introduced several measures to align the Egyptian tax and transfer
pricing regime with the globally agreed standards and principles, and
particularly, to combat tax evasion and avoidance arising from transfer mis-
pricing.
The updated Egyptian Transfer Pricing
Guidelines
represent one of the key pillars driven by Egypt’s comprehensive
Tax Reform Agenda, aiming at increasing domestic resource mobilization in order
to foster sustainable economic growth and income redistribution by improving
the design of tax policies and international tax cooperation.
The 2018 Egyptian Transfer Pricing Guidelines
provide
guidance on a wide range of transfer pricing issues, such as the use of the
most appropriate method, and the documentation required to be prepared and
maintained by taxpayers to demonstrate compliance with the Law and its
Executive Regulations.
The updated Guidelines endorse several of the
BEPS project’s recommendations, and specifically require taxpayers to prepare
their transfer pricing documentation in accordance to the three-tiered
documentation approach. Moreover, a formal Advanced Pricing Agreement system
has been introduced, which allows taxpayers to conclude APAs with the Egyptian
Tax Authority in relation to their prospective controlled transactions.
Prior to the issuance of the updated Guidelines,
an amendment of the transfer pricing articles of the Executive Regulations to
the Income Tax Law has taken place in May of 2018, through which the scope of
controlled transactions became broader, the five OECD transfer pricing methods
have been endorsed, and an Advance Pricing Agreement “APA”
system has
been legally recognised.
