Tax Alert - Egypt Introduces New Tax Reform Initiatives

The STTR is an important plank in the narrative of how the Two-Pillar Project leans towards emerging and developing markets. Its introduction was a significant step towards creating a more equitable global tax system by ensuring these countries receive their fair share of tax revenues from cross-border economic activities.

Effective 22 February 2024, Egypt's Unified Tax Procedures Law (UTPL) has undergone some changes, particularly in Article 12, which pertains to transfer pricing compliance by increasing the materiality threshold. Key changes • Easing of Master File and Local File requirements: Previously, any taxpayer engaging in related party transactions exceeding EGP 8 million was obligated to prepare and submit a Master File and Local File. • Increased materiality threshold: The revised law has raised this threshold to EGP 15 million. This means that taxpayers with related party transactions totaling less than EGP 15 million in a taxable year are now exempt from the burdensome task of preparing and submitting these transfer pricing documents. Implications for taxpayers This amendment offers significant relief to small and medium-sized enterprises (SMEs) operating in Egypt. By increasing the materiality threshold, the Egyptian tax authorities have recognized the administrative burden associated with transfer pricing compliance and have sought to streamline the process for taxpayers with relatively low levels of related party transactions. It is important to note that while the threshold for preparing Master Files and Local Files has been increased, taxpayers must still comply with other transfer pricing obligations, such as documentation requirements and transfer pricing analysis.

Our tax experts break down the key changes under Egypt's newly issued VAT reforms for non-resident suppliers for e-commerce transactions