Transfer Pricing Documentation Requirements in Egypt

Transfer pricing (TP) refers to the prices charged between related parties — subsidiaries, branches, or affiliates of the same multinational group — for goods, services, financing, and intangible assets. Because these prices are negotiated within a controlled environment rather than a competitive market, tax authorities worldwide scrutinise them to prevent profit shifting to low-tax jurisdictions. Egypt introduced formal TP rules through Article 30 of the Income Tax Law No. 91 of 2005, with detailed guidelines issued subsequently by the Egyptian Tax Authority (ETA).

The Arm's Length Standard

Egypt's TP framework is anchored in the arm's length principle: related-party transactions must be priced as if they had been conducted between unrelated, independent parties under comparable circumstances. The ETA accepts the five OECD-recognised methods for determining arm's length pricing:

• Comparable Uncontrolled Price (CUP)
• Resale Price Method (RPM)
• Cost Plus Method (CPM)
• Transactional Net Margin Method (TNMM)
• Profit Split Method (PSM)

The taxpayer must apply the most appropriate method given the nature of the transaction and available comparables. TNMM is the most frequently applied method in Egyptian practice due to the scarcity of reliable internal CUP data.

Documentation Requirements and Thresholds

Taxpayers engaged in controlled transactions exceeding EGP 3 million in aggregate during the tax year are required to maintain contemporaneous TP documentation. The documentation package should include: a description of the group structure and business; a functional analysis identifying the functions performed, assets used, and risks assumed by each party; a description of the controlled transactions and the pricing method applied; benchmarking analysis with a comparables search from commercially available databases; and the final TP position showing that the applied price falls within the arm's length range.

Advance Pricing Agreements

Egypt allows taxpayers to request an Advance Pricing Agreement (APA) from the ETA to fix the TP methodology for future transactions over a defined period (typically three years). A unilateral APA provides certainty against ETA adjustments; bilateral APAs, negotiated between Egypt and a treaty partner, eliminate the risk of double taxation. The APA process requires disclosure of significant commercial and financial information and is best pursued with experienced TP advisers.

Penalties and Audit Exposure

Where the ETA makes a TP adjustment, additional tax is assessed on the income realised by the Egyptian entity as a result of the adjustment, plus interest at the legal rate. Failure to maintain adequate documentation shifts the burden of proof to the taxpayer, who must then demonstrate arm's length pricing retrospectively — a significantly harder evidentiary task. Penalties for non-disclosure of related-party transactions can reach 3% of the total value of undisclosed transactions.

ETAF Office provides end-to-end transfer pricing support: group structure analysis, benchmarking studies, local-file and master-file preparation, APA applications, and ETA audit defence. Our team stays current with ETA guidance and OECD Base Erosion and Profit Shifting (BEPS) developments to ensure your intercompany pricing withstands scrutiny.