Egypt’s Ministry of Finance has amended 27 double taxation agreements, out of a total of 60 deals, the rest of which is expected to follow suit, to satisfy the requirements of the OECD/G20 Inclusive Framework on tax base erosion and profit shifting (BEPS) which was approved by 140 countries, including Egypt.
The announcement came during a symposium organized by the tax committee at the American Chamber of Commerce (AmCham) in Cairo last Wednesday.
During the event, the Egyptian Tax Authority (ETA) revealed that it did not receive any instructions about imposing a fine on companies that missed the deadline for submitting their local and basic tax returns to the Transfer Pricing Unit at ETA. However, two officials from ETA said the Transfer Pricing Unit made a list of those companies.
Meanwhile, the Ministry of Finance noted that it is still studying the mechanisms for implementing the OECD/G20 Inclusive Framework on BEPS and the minimum tax that must be paid by international companies that achieve a certain level of profits.
The symposium was moderated by Hassan Hegazy, head of AmCham’s tax committee, and Hossam Nasr, deputy head of the committee.
Hanan Khalaf, head of international taxes at ETA, said that Egypt is currently in a good position in terms of the development of tax legislation and the modernization of the authority. She confirmed that free-zone companies are not subject to transaction pricing, because they are exempted, but the Unified Tax Procedures Law obligated them with the country by country reporting (CbCR)
She added that the local company bears the legal responsibility in the event that the foreign related company did not pay the required taxes to the authority.
Nesreen Salah El-Din, head of the Transfer Pricing Unit, said that tax returns that do not comply with basic conditions announced in the guideline will not be considered, and that the taxpayer has the right to appeal against the decisions of the Transfer Pricing Unit before an appeal committee.
On the other hand, she said that the company that buys the same service from related companies at different prices shall mention all the prices in its tax filing with the necessary documents to prove it.
The symposium’s attendees asked about the criteria for measuring risks when examining the companies that fall under the jurisdiction of the Transfer Pricing Unit. Salah El-Din said that a company is considered high-risk if it loses continuously, or if most of its transactions are in tax havens, and its tax file indicates high royalties.
It is worth noting that, several months ago, transfer pricing forms were made available on the automated tax procedures system.
According to previous statements by Reda Abdel Qader, head of the Tax Authority, according to Article (12) of the Unified Tax Procedures Law, every person who has commercial or financial transactions with related persons is obligated to submit documents of these transactions.
The transfer pricing form comprises the local and basic tax returns. The local tax return must include the inter-transactions of the local taxpayer and their analyses, and must provide information about the associated persons and distribution of income within the related companies worldwide, the taxes paid by the group, the number of employees, capital, and retained earnings, the tangible assets of the group in each country and identification of the countries in which the group exercises its activities, as well as indicators of the place of carrying out economic activity through the group of related persons.
Abdel Qader explained that commercial and financial transactions mean all transactions carried out by the financier with related persons, including, but not limited to, the sale and purchase of goods and services of all kinds, the sale and purchase of assets, the recovery of expenses, royalties, and loans of various types and names, including credit facilities and the purchase of or selling securities, buying or selling contracts or assigning them, and buying or selling intangible assets.
