On December the 3rd, 2020, new amendments have been introduced to the Unified Tax Procedures Law No. 206 of 2020 by the virtue of the Law No. 211 of 2020 (the “New Amendments”). The New Amendments were published in the Official Gazette on December the 3rd, 2020 and came into force on December 4th, 2020.
Scope of Application:
The New Amendments have introduced Transfer Pricing specific penalties, and sanctions for tax evasions and non-submission of tax returns, through amending Articles No. (13), (44), (70) and (73). Further, the New Amendments have introduced new articles, Articles No. (73) bis and (74) bis.
The Letter of the New Amendments:
The New Amendments modified the last paragraph of Article (13) which introduced Transfer Pricing specific penalties as follows:
(a) Non-disclosure of the related party transactions in the annual income tax return
- 1% from the undisclosed related party transactions amount, in case of failure to disclose the related party transactions in the annual income tax return.
(b) Failure to submit the Master File, the Local File, or the Country by Country Report "CbCR" on due time mentioned in the first paragraph of Article 13 of the Unified Tax Procedural Law No. 206 of 2020.
- 3% from the related party transactions amount in case of failure to submit the Master File, or the Local File.
- 2% from the related party transactions amount in case of failure to submit the Country by County Report "CbCR".
And in all events, the total penalty shall not exceed 3% of the total value of the related party transactions amount.
In addition, Article (44) limits the Tax Authority’s power to assess or amend the tax return to be within five years from the lapse of the period required by law to submit the tax return.
Further, the New Amendments detailed in Article 70 states that penalty for not submitting the tax return after the lapse of sixty days from the period required by law to submit the tax return, is a fine not less than fifty thousand Egyptian pounds and does not exceed two million Egyptian pounds, while the penalty, in case of the repetition of the failure to submit the tax return for more than six monthly returns or three annual returns, is a fine not less than fifty thousand Egyptian pounds and does not exceed two million Egyptian pounds and/or imprisonment for a period not less than 6 month and does not exceed 3 years.
On a separate note, Article (73) of the New Amendments states that the liability for the tax evasion with respect to the corporate entities lies on the manager, chairman, managing director responsible for the actual management and operations unless proved ignorance of the incident of evasion.
Finally, the New Amendments added new articles to Law No. 206 of 2020, Article 73 bis and Article 74 bis. Article 73 bis mentions that the provisions of incrimination and punishment mentioned under the Tax Law, according to the definition provided under Article 1 of Law No. 206 of 2020, or any other law, shall be applied on the matters thar are not regulated by a specific provision in section 9 of Law No. 206 of 2020. And Article (74) bis clarifies the prescription period of the criminal proceedings to be after the elapse of five years from the date of the end of the year for which the tax is due.