Introduction
The OECD’s global tax reform especially BEPS 2.0, with its two pillars on profit reallocation and the Global Minimum Tax (GMT) – is reshaping how multinational enterprises (MNEs) are taxed worldwide.
For countries in the Middle East and North Africa (MENA), this reform is more than a technical tax update. It touches on investment strategy, competition, and how these economies position themselves in a post–“tax haven” world.
This article explains how Egypt and key MENA jurisdictions are responding conceptually to global tax reform, what this means for multinationals in the region, and which strategic themes are emerging as common patterns.
1. The OECD Global Tax Reform in Brief
The OECD’s global tax reform mainly revolves around two pillars:
Pillar One – Reallocates part of the residual profits of large, highly profitable MNEs to market jurisdictions, even if they lack a traditional physical presence.
Pillar Two – Introduces a Global Minimum Tax of 15% on large MNEs (revenue ≥ €750 million), ensuring that group profits are taxed at no less than this minimum, regardless of where they are booked.
For MENA jurisdictions, the key questions are:
How to align domestic rules with these global standards
How to protect tax bases without undermining investment
How to maintain competitiveness after low-tax models become less effective
2. Egypt’s Response: Gradual Alignment and Focus on Base Protection
2.1 Strengthening Domestic Tax Framework
Egypt has, over the last years, been steadily modernizing its tax framework through:
Expanding transfer pricing regulations and documentation obligations
Focusing on Withholding Tax (WHT) enforcement on cross-border payments
Developing e-invoicing and digital reporting systems
Enhancing dispute resolution and audit procedures
While BEPS 2.0 (Pillar One and Pillar Two) is a global project, Egypt’s internal direction already reflects the same philosophy:
Greater emphasis on substance over form
Increased scrutiny on treaty abuse, royalties, and technical services
Closer alignment with OECD principles in practice
2.2 Preparing for Pillar Two Logic
Even before fully implementing a Global Minimum Tax regime, Egypt is:
Paying attention to how effective tax rates (ETR) are perceived in the group context
Considering how top-up tax rules in headquarters countries may interact with Egyptian subsidiaries
Increasing focus on proper allocation of profits through TP compliance
For many groups with operations in Egypt, the direction is clear:
They must move toward consistent, defendable TP policies and robust documentation, anticipating a world where “low-tax pockets” are no longer invisible.
3. Gulf Countries: From Low-Tax Advantage to Strategic Compliance
3.1 UAE: Corporate Tax and the End of Pure Zero-Tax Perception
The United Arab Emirates has already shifted away from a pure “no corporate tax” model by introducing a federal corporate income tax regime.
In the context of global reform, the UAE’s approach can be summarized as:
Aligning with global expectations to protect its reputation as a compliant, transparent jurisdiction
Maintaining competitiveness through moderate rates, incentives, and economic substance regimes
Preparing to interact with Global Minimum Tax logic, especially for large inbound and outbound MNEs
While the details and timelines vary, the trend is clear:
The UAE is positioning itself not as a tax haven, but as a modern, fully compliant hub for regional and global headquarters.
3.2 Saudi Arabia: Tax Reform Aligned with Global Standards
Saudi Arabia has long had an established tax system with corporate income tax and Zakat. Its tax authority has already:
Adopted and reinforced transfer pricing rules
Increased documentation and disclosure requirements
Engaged in BEPS-aligned reforms
Shown strong interest in OECD standards and global exchange of information
For BEPS 2.0 and Pillar Two, KSA’s positioning is likely to be:
Relatively comfortable from an ETR perspective, as headline rates are already above 15%
Focused on ensuring consistency, transparency and alignment with the global minimum tax framework
Using the reform as an opportunity to enhance investor confidence, rather than relying on low tax rates
4. Other MENA Jurisdictions: Balancing Competitiveness and Compliance
4.1 Qatar, Bahrain, and Free Zone Models
Several jurisdictions in the region historically relied on:
Low or zero corporate tax
Free zones offering tax holidays or incentives
Flexible holding and IP regimes
Under a 15% GMT world, the pure tax advantage from such regimes is reduced, because:
If a jurisdiction taxes less than 15%, another jurisdiction in the group may charge a top-up tax
This means the “tax benefit” doesn’t disappear, it just gets captured by someone else
As a result, these countries are increasingly:
Reassessing incentive structures to focus on substance and real activity, not only tax
Exploring domestic minimum tax or equivalent responses
Positioning themselves as operational hubs, not just booking centers
4.2 North African Jurisdictions (e.g., Morocco, Tunisia)
North African countries are following a path similar to Egypt:
Gradually reinforcing domestic tax rules
Aligning with OECD standards in areas like transfer pricing and information exchange
Monitoring BEPS 2.0 developments to adjust their frameworks at the right time
For multinational groups, the trend across North Africa is a clear shift toward:
More documentation
Less tolerance for aggressive tax planning
Greater focus on source taxation of real activity
5. Common Themes in MENA’s Response to Global Tax Reform
Despite differences between individual countries, several common regional themes are emerging:
5.1 From “Rate-Based” Advantage to “Substance-Based” Advantage
Low statutory tax rates alone are no longer a sustainable competitive edge.
MENA jurisdictions are:
Emphasizing real investment, local employment, and operational presence
Building economic substance frameworks
Competing on infrastructure, stability, and strategic location, not just tax
5.2 More Focus on Transfer Pricing and Documentation
As global rules tighten:
Transfer pricing in MENA is becoming more central
Authorities expect functional analysis, benchmarking, and robust files
Intra-group charges (services, royalties, financing) face increasing scrutiny
Companies operating in the region can no longer rely on informal approaches.
TP policy + documentation is now part of the minimum compliance package.
5.3 Early Adoption of International Transparency Standards
MENA jurisdictions are increasingly active in:
Exchange of information agreements
Economic substance reporting
Automatic exchange of financial account information (CRS)
Anti–treaty shopping measures
The message to multinationals is clear:
The region is not isolated from global compliance trends it’s part of them.
6. What Multinationals in MENA Should Do Now
Regardless of whether a specific country has fully rolled out Pillar One or Pillar Two rules, multinationals in MENA should begin preparing on several fronts:
6.1 Conduct a Pillar Two Readiness / Impact Assessment
Map group entities by jurisdiction
Compute effective tax rates per country
Identify locations with ETR < 15%
Model potential top-up tax exposure
6.2 Upgrade Transfer Pricing and Intercompany Structures
Review intercompany agreements
Ensure TP policies match actual functions, risks, and assets
Align models with substance in Egypt and other MENA countries
Prepare local files and master file where relevant
6.3 Strengthen Data and Reporting Capabilities
Ensure ERP systems can produce jurisdiction-level financial data
Improve tax accounting, including deferred tax analysis
Prepare for new reporting formats under global rules
6.4 Reevaluate Holding, IP, and Service Center Structures
Test whether old “low-tax” structures still make sense under GMT
Consider onshoring or relocating functions closer to real operations
Align group structure with operational reality, not just tax outcomes
Conclusion
The OECD’s global tax reform is pushing Egypt and other MENA countries toward a more transparent, standardized, and substance-driven tax environment.
While each jurisdiction in the region moves at its own pace, the overall direction is consistent:
Less room for aggressive tax arbitrage
More emphasis on real economic activity
Growing reliance on transfer pricing, documentation, and global minimum tax concepts
For multinationals operating in or through MENA, 2025 and beyond will not be about “chasing the lowest tax rate”, but about building sustainable, compliant, and well-documented structures that can withstand scrutiny both locally and internationally.
