Transfer Pricing – New Practical Manual for Country by Country Reporting issued by Egyptian Tax Authority

Introduction:

Egyptian Tax Authority (ETA) has released recently its practical manual for Country by Country Reporting (CbCR) as outlined in Decree No. 221/2018 and No. 547/2018 which amends the Egyptian Transfer Pricing guidelines.

The new manual provided overview about common questions related to Country by Country Reporting as legislated by ministerial Decree 547/2018.

Main important issues included in the manual:

Brief on Country by Country Reporting:

CbCR is part of Action 13 included in the Base Erosion and Profit Shifting (BEPS) Actions, this was published by Organization for Economic Cooperation and Development (OECD) in 2015 in order to enhance transparency for tax administrations by providing them with adequate information to conduct transfer pricing risk assessment.

Who should apply the CbCR:

Large multinationals corporations should apply CbCR in all countries they have business with.

Threshold for Group Associated Enterprises (GAE) who has equal or more than EGP 3 billion consolidated revenue where the holding company/individual is inside Egypt will be required to maintain the filing for CbCR.

Threshold for Group Associated Enterprises (GAE) who has equal or more than Euro 750 million of consolidated revenue where the holding company/individual is outside Egypt will be required to maintain the filing for CbCR.

Deadline:

CbCR should be filed with the Egyptian Tax authority no later than 12 months after the last day of the fiscal year ending on or after December 31, 2018 that shall be filed starting from December 31, 2019.

Submission of the CbCR:

CbCR filing should be completed in XML format in accordance with the XML Schema published on the OECD website and taxpayers are expected to submit CbCR to ETA in paper filing format or by electronic means (when applicable).

Responsibility of CbCR Information:

The burden is on the ultimate parent entity to ensure that the information provided in the CbCR is complete and accurate.

Moreover, source of data used may be chosen by the ultimate parent entity from: its consolidation reporting packages, from separate entity statutory financial statements, regulatory financial statements, or internal management accounts. It should be the same data used from year to year because the ETA expects the ultimate parent entity to take a reasonable, practical and consistent approach.

Information Included in the CbCR:

CbCR for a GAE in respect of each jurisdiction must contain the following information:

– On an aggregate basis:

• Amount of unrelated party revenue, related party revenue and total revenue;
• Amount of profit or loss before income tax
• Amount of income tax paid
• Amount of income tax accrued
• Amount of stated capital
• Amount of accumulated earnings
• Number of employees
• Value of tangible assets other than cash or cash equivalents

– Identification of each constituent entity carrying out a business or tax resident in each jurisdiction.

– In addition to Table 1 and Table 3 to be completed in the CbCR.

CbCR Notification Requirements:  

A constituent entity of a Multinational Enterprise (MNE) Group that is tax resident in Egypt will need to notify the ETA whether it is the ultimate parent entity or not. All notifications must be made no later than the last day of the fiscal year to which the CbCR relates. However, for the first CbCR which will take place in 2019, notifications must be made to ETA no later than September 30, 2019.

In addition, CbCR notification should be submitted in paper format or by electronic means (when applicable).

Responsibility and Commitment:

Andersen Tax & Legal Egypt’s tax team has prepared this summarized tax report to introduce practical manual for CbCR -Transfer pricing documentation. Efforts have been combined to produce this report with clear and accurate content however this report aims only to spread general information and should not be treated as a legal document or a document that can be used for decision making, or for issuing specialized consultations. Please contact Andersen Tax & Legal Egypt for tailor made solutions.