Transfer Pricing in Egypt: Article 30 and the Executive Regulations
Which texts govern transfer pricing in Egypt today? Article 30 of the Income Tax Law, Articles 38 to 40 of its regulations as amended in 2018, and the 2023 related-person test.
Executive summary
- Transfer pricing in Egypt rests on Article 30 of the Income Tax Law, Law 91 of 2005, whose text has not changed since it was enacted.
- The definition of a related person in Article 1 was replaced by Law 30 of 2023 with effect from 16 June 2023.
- Articles 38, 39 and 40 of the Executive Regulations apply as amended by Minister of Finance Decree 221 of 2018, in the wording reproduced in the Egyptian Transfer Pricing Guidelines: five methods, chosen according to the nature of the transaction.
- The documentation duties sit in Article 12 of the Unified Tax Procedures Law, Law 206 of 2020, and the financial sanction in the last paragraph of Article 13 as replaced by Law 211 of 2020.
- The guidelines are not law, but the regulations make the guide the primary reference of the Egyptian Tax Authority (ETA) when it checks arm's length pricing.
Article 30: the rule and the ETA's power
In the ETA's English rendering, Article 30 provides:
"In case associated enterprises have set conditions for their commercial and/or financial transactions other than conditions set with independent enterprises, where such conditions lead either to reduce the tax base or shift the tax burden from a taxable enterprise to an exempt or non-taxable enterprise, ETA has the right to determine the taxable profit on the basis of the arm's length price. ETA Commissioner may conclude agreements with such associated enterprises to follow one or more methods in determining the arm's length price in their transactions. The Executive Regulations of this law shall specify methods of determining the arm's length price."
Article 1 defines the arm's length price as "the price upon which two or more independent enterprises deal, determined according to market forces and transaction conditions". The rule is not limited to cross-border dealings: the guidelines 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".
Who is a related person
Law 30 of 2023 was published in the Official Gazette on 15 June 2023. It set no special start date for this definition, which therefore applies from the following day, and it gives no transitional rule for the tax year in which that day falls.
| Element | Until 15 June 2023 | From 16 June 2023 |
|---|---|---|
| General test | A relationship that affects the determination of the tax base | A relationship that affects the tax base directly or indirectly, through management, control or ownership; in general, two persons are related where one or both may act on the directions, requests, suggestions or will of the other, or of a third person |
| Basis of the 50% test | Number or value of shares, or voting rights | Voting or management rights, profit-distribution rights, or capital rights |
| Attributed holdings | No rule | A holding attributed to a person through a related person may not be attributed to another related person |
| Employees and customers | No rule | Two persons are not related merely because one is an employee or customer of the other, or both are employees or customers of a third person, unless this affects the tax base |
The four listed categories remain, with a new basis for the 50% test in the two company categories. The Executive Regulations of the Unified Tax Procedures Law (Ministerial Decree 286 of 2021) had used substantially the same broad wording since 4 June 2021, for their own purposes.
Law 151 of 2026 made lending by unrelated parties a condition of two new rules on loans for national infrastructure projects (Articles 52 and 56); see Income tax amendments: Law 151 of 2026.
Methods: Articles 38 to 40 of the Executive Regulations
According to the ETA's guidelines, Ministerial Decree 221 of 2018 amended all three articles. The current text given in this section is taken from the guidelines, which reproduce the amended articles and cite the regulations "as per the amendment of May 22, 2018". The amended text as they reproduce it contains no transitional rule for earlier periods. Decree 286 of 2021, which repealed a long list of articles of the same regulations, left the three articles untouched.
| Point | Original text (2005) | Current text (2018) |
|---|---|---|
| Methods | Comparable uncontrolled price, cost plus, resale price | The same three, plus profit split and transactional net margin |
| Choice | Priority to comparable uncontrolled price, then either of the other two | Any of the five, according to the nature of the financial or commercial transaction and the transaction conditions |
| If none applies | A method from the OECD model or any other method appropriate for the taxpayer | Any other appropriate method, provided the books and documents supporting its appropriateness are kept |
| Guide | No provision | Issued by the Minister; the ETA's primary reference |
An advance agreement on the method is available under both texts. Under the current Article 40, in the ETA's English rendering, "ETA shall consider these guidelines as its basic reference for verifying the application of the arm's length principle, unless otherwise required under certain cases which will be carried out based on taxpayer's request and upon the approval of ETA's Commissioner."
On comparability, the current text no longer explains the methods; the original text named, for the comparable uncontrolled price method, the legal terms binding each party, market circumstances and the circumstances of the transaction. The detail now sits in Chapter Three of the guidelines, which lists six factors: characteristics of the property or services, functional analysis, contractual terms, economic circumstances, business strategies and government policies.
Documentation and its sanction: where they sit today
Article 12 of the Unified Tax Procedures Law, Law 206 of 2020, in force from 20 October 2020, requires every person with commercial or financial transactions with related persons to submit three documents for transfer pricing: the master file, the local file and the country-by-country report. Where the duty is breached, the ETA may set the pricing rules it considers appropriate, without prejudice to the right of appeal.
Article 13 sets the deadlines, and its last paragraph imposes an amount calculated as a percentage of the value of the related-party transactions, not of the tax; that paragraph was replaced by Law 211 of 2020, in force from 4 December 2020. Articles 14 to 20 of the procedures regulations implement these rules; under Article 14, a taxpayer who did not submit the documents and then challenges the pricing rules set by the ETA bears the burden of proof.
The exemption threshold for the master and local files, which the fourth paragraph of Article 12 sets and allows the Minister to raise by decree, and the percentages payable, are for a separate bulletin, as are the content and deadlines of each file.
The status of the guidelines
The ETA publishes the Egyptian Transfer Pricing Guidelines in Arabic and English; where the two differ, the Arabic prevails. The cover describes them as "a guide to the application of Article (30)" of the Income Tax Law, and the introduction presents them as the ETA's views on Article 30 and amended Articles 38, 39 and 40, updating the guidelines issued in 2010.
The guidelines are not law, but the texts refer to them in three places. Article 40 of the regulations makes the guide issued by the Minister the ETA's reference when it checks pricing; the last paragraph of Article 12 of the procedures law leaves the rules and procedures for submitting the documents to a guide issued by the Minister; and Article 19 of the procedures regulations makes that guide the governing basis for what each file must contain, so that a file that does not meet it is not treated as submitted, technically or legally. Where the guidelines differ from later legislation, the legislation prevails: they still reproduce the 2005 definition of a related person. The ETA also issues interpretive instructions; Instruction 78 of 2023 on Articles 12 and 13 states that dividends are not counted as transactions with related persons.
What this requires
- Identify related persons under the definition in force, measuring the 50% test in the 2023 definition on voting or management, profit-distribution or capital rights.
- Choose a method for each transaction from the five and document why it fits; where another method is used, keep the books and documents that support it.
- Review any transfer pricing policy still based on the priority of the comparable uncontrolled price method or on the 2005 definition, and build the comparability analysis on the six factors in the guidelines.
- Disclose related-party transactions in the tax return, and prepare the files under Articles 12 and 13 of the procedures law.
- Consider an advance agreement with the Head of the ETA where transactions recur and the method may be disputed; the request forms are published on the ETA website.
The firm's Tax Department identifies related persons, selects and documents the transfer pricing method, and reviews intra-group transactions before a tax examination.
Mahmoud Nassef, Founder Partner
Chartered Accountant, Ministry of Finance, Egypt
Member, Egyptian Society of Accountants & Auditors
Member, Egyptian Tax Society
Member, Egyptian Society for Public Finance and Taxation
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Disclaimer: This bulletin is prepared for general information on the legislation in force at the date of its publication. It does not constitute a professional opinion or tax or legal advice on any particular matter, and it should not be relied upon in place of advice based on an examination of the circumstances of each case. Nassef & Partners International accepts no responsibility for any action taken, or refrained from, in reliance on its contents. The positions stated remain subject to subsequent legislation and decisions.