Egyptian Law No. 5 of 2025, which is part of the ‘tax facilitation package’ set to be implemented from this year, was published in the Official Gazette on February 12 2025. The law concerns the regularisation and settlement of the tax status of certain taxpayers, including those that have not submitted their tax returns for any period from 2020 up to the period prior to the law's effective date, and those that have submitted their tax returns but need to amend them due to oversight, error, or omitted data.
This article summarises Article 3 of Law No. 5 of 2025 and considers the implications of delayed/ non-submission of transfer pricing (TP) documentation reports for financial years from 2020 up to the period prior to the law's effective date.
Background
Article 13 of the Unified Tax Procedures Law (UTPL) for 2020 introduced TP-specific penalties that range from 1% to 3% of the value of the intercompany transactions in which a taxpayer engaged within the relevant taxable year for:
Non-disclosure of the related-party transactions in the annual income tax return; and
Failure to submit the master file, the local file, or the country-by-country (CbC) report/notification within the specified deadlines.
Article 3 of Egyptian Law No. 5 of 2025
Article 3 of the law addresses certain aspects of TP compliance requirements; specifically:
Non-filing of TP documentation – taxpayers that have not submitted their TP documentation (i.e., a master file, a local file, and a CBC report/notification) for any tax period from FY 2020 up to the period prior to the effective date of this law have the right to submit their documentation within six months from the law's effective date; and
Amendment of TP documentation or tax returns – taxpayers that have submitted their TP documentation or corporate income tax returns for the aforementioned tax periods have the right to submit amended returns in the case of oversight, error, or omitted data, without incurring delay fines or additional tax.
Consequently, the penalties stipulated in the UTPL will not apply, provided that the aforementioned returns/TP documentation stipulated in this article are submitted within six months from the law’s effective date.
TP implications – checkpoint
Tax functions should ask themselves the following questions to facilitate compliance:
Has the corporate tax return (CTR) transfer pricing disclosure been filled in correctly? Schedule 508 of the CTR transfer pricing disclosure should be checked in this regard.
Has all the three-tiered TP documentation been filled in? Have all the data, sections, and information requirements, as well as the rules, been fulfilled?
Recommendations
Based on Article 3 of Law No. 5 of 2025, the following actions are recommended:
Tax functions are strongly advised to expedite the preparation of any TP documentation for the period from 2020 up to the period prior to the law’s effective date that has not been submitted within the legal deadlines, and within the timeframe specified in Law No. 5; and
Schedule 508 in the CTR, related to the disclosure of related-party transactions, should be completed or amended, if it is incomplete or contains errors.
Taxpayers should take advantage of the waiver of financial penalties and sanctions stipulated in the law, provided that the required returns and documentation are submitted within six months from the law’s effective date.
Key takeaway for taxpayers
The tax facilitation package assists taxpayers in regularising their tax status and avoiding penalties. Companies operating in Egypt should make every effort to utilise the provisions.
