Egypt

Transfer pricing

Transfer pricing in Egypt is governed by Income Tax Law No.91 of 2005, Article (30) and its Executive Regulations, Articles (38), (39) and (40), the Egyptian Transfer Pricing Guidelines (“ETPG”), and the Unified Tax Procedures Law, Law No 206 and its amendments under Law No. 211 of 2020, and its executive regulations - together referred to herein as “the Law”. The Law defines the arm’s length principle, related parties, the transfer pricing methods that are allowed to be used in determining the arm’s length price, together with compliance requirements and associated non-compliance penalties. 

Specifically, in November 2010, the ETA issued the first version of the ETPG, which serves as a practical guide to the application of Article (30) of the Income Tax Law No.91 of 2005 and its executive regulations (Articles 38, 39, and 40). The Guidelines emphasize the arm’s-length principle, comparability methods, the selection of appropriate transfer pricing methods, and documentation requirements, while also recommending consultation of the OECD Guidelines for additional insights.  

In October of 2018, an updated version of the ETPG was released. The update was intended to refresh the 2010 ETPG, and to align the documentation requirements with the Base Erosion and Profit Shifting (“BEPS”) Action 13 three-tiered documentation. The updated ETPG introduced a three-tiered approach to transfer pricing documentation, which includes the mandatory filing of a Master File, Local File, and Country-by-Country Reporting (“CbCR”), in alignment with the documentation requirements under BEPS Action 13. These changes aim to streamline and improve compliance with TP documentation requirements, reduce compliance burdens on taxpayers, and achieve consistency with global documentation standards. 

Additionally, the 2018 ETPG introduced a formal Advance Pricing Agreements (“APAs”) program which forms a part of a broader strategy to enhance tax compliance, provide certainty to taxpayers, and provide for an advance dispute resolution mechanism related to TP. 

In October 2020, the Unified Tax Procedures Law was released, mandating taxpayers engaged in related party transactions with a total value of EGP 8 million or more in a given taxable year to prepare and submit a transfer pricing Local File and Master File. This threshold was subsequently raised to EGP 15 million by Ministerial Decree No. 52 of 2024, effective February 22, 2024. It also introduced penalties for non-compliance with the Transfer Pricing three-tier filing requirements (Master file, Local file, and CbCR) in Egypt as follows: 

• 1% of the value of undisclosed related party transactions within the TP disclosure of the annual corporate tax return of the taxpayer; 

• 3% of the value of the related party transactions in case of not submitting the local file. 

• 3% of the value of the related party transactions in case of not submitting the master file. 

• 2% of the value of the related party transactions in case of not submitting the CbCR or the CbCR notification. 

In case of multiple breaches to the above listed TP filing requirements, the penalty shall not exceed 3% of the value of the related party transactions. 

In December 2025, the Minister of Finance issued Decision No. 494 of 2023, which increased the threshold referenced in Article (12) of the Unified Tax Procedures Law (Law No. 206 of 2020). Under this decision, the Transfer Pricing Documentation threshold stated in paragraph four of Article (12) has been increased to EGP 30 million, effective the day following its publication in the Egyptian Gazette. 

The three-tiered approach

The updated ETPG introduced the three-tiered approach to TP documentation and included the mandatory preparation and submission of the Master File, Local File, and the CbCR, subject to the applicable thresholds.  

• Master File: Taxpayers engaged in related party transactions of EGP 30 million or more within a taxable year are required to prepare and submit a Master File. This file provides comprehensive information about the Multinationals enterprises (“MNEs”) global business operations, location of key intangibles, key intercompany arrangements and associated transfer pricing policies. 
• Local File: Taxpayers engaged in related party transactions of EGP 30 million or more within a taxable year must also prepare and submit a Local File. This file contains detailed information about an entity’s related party transactions, arm’s length testing and financial results. 
• CbCR: The CbCR requires MNEs to disclose detailed financial and operational information for each jurisdiction in which they operate, including information pertaining to allocation of income, taxes paid, and economic activities across jurisdictions.  

Group entities must file a notification about the reporting entity before the end of the reporting fiscal year, so that they notify the ETA on the reporting entity, fiscal year to which the report relates and the Jurisdiction in which the CbCR will be filed: 

The thresholds for CbCR are outlined in the ETPG as follows: 

• Egyptian-parented groups with foreign subsidiaries must prepare and file a CbCR if their annual consolidated group revenue equals or exceeds EGP 3 billion. 

• Egyptian subsidiaries of foreign-parented groups are subject to the OECD threshold of €750 million and must file reports in the jurisdiction where the ultimate parent entity resides. They are only required to submit CbCR notification forms to the ETA in that case. 

Submission deadlines

The Master File should be prepared in accordance with the taxpayer group's ultimate parent's Master File submission date and made available to the ETA in 'due course'. In case the ultimate parent is not required to submit a Master File in its country, then the Master File should be submitted to the ETA along with the Local File. 

The Local File is required to be submitted to the ETA within two months following the filing of the tax return. 

CbCR must be filed with ETA no later than 12 months after the last day of the fiscal year to which CbCR relates.  Whereas CbCR notifications must be submitted no later than the last day of the fiscal year to which CbCR pertains. 

Entities operating in free zones must prepare and submit CbCR notifications if they are consolidated and included in the CbCR submitted by the ultimate parent entity.    

TP Form - Table 508 in the Corporate Tax Return (“CTR”) 

Taxpayers are required to disclose all their related party transactions affecting the profit and loss as well as the balance sheet of the entity in their CTR under Table 508, which would include:  

• The value and nature of related party transactions.  

• Value of the intercompany transaction. 

• Information about the related party, and country of tax residence. 

• The transfer pricing method used.  

• Any other information specified by the Tax Administration. 

• The deadline of the TP form is the local entity’s CTR filing date as it’s embedded within the CTR, and a non-compliance penalty of 1% is imposed on the undisclosed value of related party transactions in the respective year. 

Advance Pricing Arrangements (APAs)

The APA system provides Egyptian taxpayers with the benefit of agreeing in advance with the ETA on the methods to be followed by the taxpayer to determine arm's-length arrangements acceptable for tax purposes when it comes to related-party transactions. 

The APA program should deliver benefits to the taxpayers such as certainty on TP methods, tax outcomes, increased transparency and reduced risks of audits, price adjustments, and penalties.　 

The APA program is restricted only to unilateral APA(s) at this stage; however, the ETA has indicated its intention to expand the program to also cover the bilateral and multilateral APA(s) in the future. In addition, the option to apply for the APA is open to all the taxpayers that meet the eligibility criteria set forth in the ETPG, subject to the provisions of the law including Permanent Establishments (“PEs”). 

The guidance on the APA program is contained within a new part of the ETPG, which describes the mechanisms, procedures, and implementation of the program in Egypt. The process of applying for and concluding the unilateral APA may take between three to six months, and this may vary according to the case at hand. 

Thin capitalisation

The Egyptian thin capitalisation rule provided by the Egyptian Income Tax Law dictates that the debt-to-equity ratio is currently 4:1 and will gradually change to reach 2:1 as follows:

• 4:1 for FY 2023.

• 3:1 for FY 2024 to 2027.

• 2:1 for FY 2028 onwards.

Accordingly, the Law disallows the deductibility of debit interests of Egyptian companies on loans and advances if such loans and advances are in excess of fourfold the equity average (which is calculated according to the financial statements prepared pursuant to the Egyptian accounting standards). In other words, the excess amount of interest would not be deducted.

Debt includes loans and advances, including bonds and any form of financing by debts, even if through securities with fixed/variable interest.

With respect to the debit interest, it includes all amounts paid by a taxpayer in return for the loans, advances of any kind obtained, bonds, and bills.

For determining the equity, the following items represent the basis for the calculation: the paid-up capital in addition to all reserves and retained earnings reduced by retained losses. In addition, revaluation gains should be excluded from the equation, in case they were not subject to tax. In case of retained or carryforward losses, they must be used to reduce retained earnings and reserves solely; the percentage is calculated on the basis of total loans and advances in proportion to the remaining equity amount, after deducting the retained losses with a minimum of the paid-up capital (in other words, they should be deducted from the retained earnings and reserves, where in case of a net loss balance, debt should be compared to the paid-up capital).

For the purpose of calculating the debt-to-equity ratio, average debt and equity balances are used.

It’s worth noting that the following types of loans should be excluded from the above calculation:

• Interest-free loans.
• Loans with non-taxable interests.
• Loans with a grace period for settling the interest payment solely until the end of the loan period.

Controlled foreign companies (CFCs)

Egypt currently does not define specific rules for CFCs; however, in an effort to exert similar CFC provisions, investments are evaluated according to the Egyptian Accounting Standards and the equity rights method, where the profits generating from the disposal of such investments are determined on the basis of the difference between the cost of investment acquisition and its sale value.