The threshold that exempts companies from filing detailed transfer pricing documentation has now doubled to EGP 30 mn, effective immediately for the current tax period, according to a decree reviewed by EnterpriseAM. The Finance Ministry decision means companies whose annual transactions with related parties fall below the new EGP 30 mn mark are no longer required to submit a master file, local file, or country-by-country report, a government source told us.

TP or not TP? Transfer pricing, at its core, refers to the internal pricing mechanism used when a division or a subsidiary charges another entity within the same group for goods, services, or intellectual property. This internal invoice is important for the taxman, because it prevents companies from inflating or deflating the costs of inter-company transactions to lower their taxes. But it’s also important for the companies being taxed, as it can help prevent double taxation, especially when they have operations abroad.

Why it matters

This cuts a lot of red tape for mid-market companies and growing SMEs + helps the Egyptian Tax Authority (ETA) focus on quality over quantity. Transfer pricing compliance can be one of the most administratively heavy and expensive aspects of the tax code, often requiring specialized external consultants. By doubling the threshold, the ministry is removing a major friction point for companies that were previously caught in the compliance net despite having relatively low-value inter-company transactions.

It’s also good news for employees at the ETA: By raising the floor, the authority is clearing its desk of small-fry documentation to focus its audit resources on high-risk, high-value transactions involving large-caps and multinationals, where the potential for earnings-shifting is greatest.

The context

The decision ties in with a key pillar of Finance Minister Ahmed Kouchouk’s first tax facilitation package, which aims to move the Egyptian Tax Authority away from a culture of blanket inspections toward a risk-based auditing system.

But wait, hadn’t the government already doubled the threshold? Despite initially beinglisted among the facilities laid out in the government’s first tranche of facilities announced in October, it was later cut from the draft.

The new threshold also accounts for the impact of inflation and the depreciation of the EGP — a EGP 15 mn transaction today represents a much smaller volume of business than it did even just a year ago, never mind before the float of the EGP.

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