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מאמרים:

מחירי העברה: מצרים- ינואר 2010

09 ינואר 2010

New transfer pricing guidelines launched

With a view to reinforcing the transfer pricing regulations in Egypt, the Egyptian tax authorities held a conference on 29 November 2010 to launch the first part of the new transfer pricing Guidelines.

The conference was attended by the international and local accounting firms and the financial managers of multinational and local companies. The speakers at the conference were the chairman of the Egyptian Tax 
Authority (ETA), who outlined the current status of the Egyptian tax system and current developments. In addition, the Assistant to the Deputy Minister of Finance, Mr. Amr El-Monayer gave a
presentation outlining the objectives and principles of the Egyptian transfer pricing guidelines.

The first part of the Guidelines covers the following:
1. The arm’s length principle
2. Practical application of the arm’s length principle
3. Comparability analysis
4. Transfer pricing methods
5. Documentation
6. Illustrative examples

Mr. El-Monayer further explained that the Guidelines are intended to serve as a guide to the application of
Article 30 of the Egyptian Tax Code, and Articles 38, 39 and 40 of the Executive Regulations, which cover the transfer pricing legalisation. Moreover, the Guidelines provide definitions of international terms, and clarify that the approach outlined in them is neither mandatory nor prescriptive; the approach adopted by a taxpayer will still depend on each taxpayer’s individual circumstances, and taxpayers are advised to follow a four-step process through which they can develop the reasoning and documentation needed to support the evaluation of their transfer prices.

The guidelines have identified the four-step approach as follows:

  • Identifying any intra-group transactions and understanding the nature of such transactions by analysis of the element. 
  • Selecting the most appropriate pricing method(s)
  •  Applying the selected pricing method(s)
  • Determining the arm’s length amount and introducing a review process to reflect any future changes


As required by the Tax Code, taxpayers are obliged to retain all the supporting documents related to their taxable income to avoid adjustment of such income by the ETA. No comprehensive predefined set of documentation meets all taxpayers’ circumstances. Taxpayers are more able to identify the documents that present a persuasive argument for TP practice. However, according to the Guidelines, the documentation must generally include the following:

  • The amount of sales and operating results from the last few years preceding the transaction under review
  • The taxpayer’s annual reports and financial statements
  • Profitability analysis with respect to the controlled transactions


During the question and answer session of the conference, we (BDO Egypt) requested confirmation that reliance can be placed on the transfer pricing documents and/or studies prepared by the parent company or headquarters, as long as the same treatment and principles are applied in Egypt. The panellists confirmed that such documentation may be acceptable, but that ETA will reserve the right to assess its applicability on a case-bycase basis.

Also among the speakers was a senior advisor from the OECD, Mr Wolfgang Bttner, who clarified that the OECD had been involved in reviewing the Egyptian transfer pricing guidelines as part of the OECD’s initiatives to cooperate with non-OECD economies in order to support tax-capacity building in developing
countries, promoting international consensus on key international tax issues, and providing input from the
non-OECD economies into the work of the OECD.

Mr Bttner praised Egypt’s TP Guidelines as a major achievement, as a standard setting pioneer in the MENA region and beyond, showing best practice in a developing country’s TP implementation and commitment to the arm’s length principle. He further elaborated on the advantage of TP guidelines for both taxpayers and the tax authorities. He also provided a brief comparison between the Egyptian guidelines and the OECD Model related to comparability factors and transfer pricing methods.

We should also like to mention that, on 2 December 2010, the ETA invited BDO Egypt to attend a meeting with the IMF, as one of two selected accounting firms in Egypt, to provide the IMF delegates with our view on Egyptian tax administration, and its compatibility with international taxation practice, including transfer pricing.

During that meeting we took the opportunity to outline the positive initiatives introduced as part of the Egyptian tax reform, which started in 2004, but also addressed the areas where there is space for enhancement — specifically the need for adequately qualified personnel to deal with the assessment of issues such as transfer pricing, which may involve a certain level of subjectivity. 
 

**The information contained on this website and from any communication related to this website is for informational purposes only and does not constitute any legal, financial or other advice. For specific tax advice you should contact a qualified professional.