- Updated
- May 2025
- Sections
- 15
- Questions
- 37
Key Facts
Core Framework
Saudi Transfer Pricing Bylaw Article 1 (2)
A reference to the arm’s length principle is provided under article 1 (2) of the Saudi transfer pricing bylaws. The Arm’s length principle is originally in Article 63 para. “c” of the KSA Income Tax Law. Transfer Pricing By-Laws provide details regarding its application. There is also a reference to the KSA Income Tax By-Laws Article 10 (11) which states the Arm’s length principle in relation to related party expenses and mentions the basis for ZATCA to issue the Transfer Pricing By-Laws.
On 31/01/2019, Saudi Arabia issued transfer pricing bylaws and guidelines, which are mostly aligned with the OECD TPG
Saudi Transfer Pricing Guidelines Chapter 4
Saudi Arabia Transfer Pricing Guidelines provide guidance on comparability analysis. In addition, Saudi Arabia takes guidance from the OECD Transfer Pricing Guidelines.
Saudi Transfer Pricing Bylaws Article 13 (c)
The comparable transaction information under Article 13 (c) of Saudi Transfer Pricing Bylaws states that the tax authority may accept the use of foreign comparable transactions by a taxable person in the event that domestic comparable transactions are not available or in the absence of domestic comparable transactions. With reference to Article 13 of the TP Bylaws that explains the comparable regions “The Authority may accept the use of foreign Comparable Transactions by a Taxable Person in the event that domestic Comparable Transactions are not available or absence of domestic Comparable Transactions. In such case, the Taxable Person must be able to demonstrate to the Authority upon its request that the foreign Comparable Transaction, or Transactions are consistent with the requirements set forth in (Chapter Three) of the Bylaws, and shall take into account the expected impact of geographic differences and other factors on the results of the foreign Comparable Transactions, including, without limitation, price and profitability.”
Saudi Transfer Pricing Bylaw Chapter 9
The Arm’s Length remuneration of a Controlled Transaction shall be determined by applying the method that, under the facts and circumstances, provides the most reliable measure of an Arm’s-Length result. Except and to the extent provided in Chapter 9 of the Bylaws, the most appropriate method shall be selected from the approved transfer pricing methods.
Documentation
Saudi Transfer Pricing Bylaw Article16, article 17 and article 18 Saudi Transfer Pricing Guidelines - Chapter 5 “Transfer Pricing Documentation”
Saudi Transfer Pricing Bylaw Article16, article 17 and article 18 Saudi Transfer Pricing Guidelines - Chapter 5 “Transfer Pricing Documentation”
Saudi Transfer Pricing Bylaw Article16, article 17 and article 18 Saudi Transfer Pricing Guidelines - Chapter 5 “Transfer Pricing Documentation”
Saudi Arabia have regular penalties on tax compliance including on CbCr documentation.
TP Methods
- CUP
- Resale Price
- Cost Plus
- TNMM
- Profit Split
- Other
Selection: Most appropriate method
Dispute Resolution
Saudi Transfer Pricing Bylaw Article 23 “Advanced Pricing Agreement” Request for Mutual Agreement Procedure Tax Ruling Request Guideline (June 2020) Saudi Arabia OECD MAP Profile
Starting from January 2024 Advanced Pricing Agreement came into effect under transfer pricing bylaws article 23. Currently Saudi Arabia is only accepting applications for unilateral APAs. Refer to Saudi Request for Mutual Agreement Procedure – Taxpayer guidance and Saudi Tax Ruling Request Guideline. Moreover, please refer to the OECD MAP Profile for Saudi Arabia.
Saudi Transfer Pricing Bylaw Article 23 “Advanced Pricing Agreement” Request for Mutual Agreement Procedure Tax Ruling Request Guideline (June 2020) Saudi Arabia OECD MAP Profile
Starting from January 2024 Advanced Pricing Agreement came into effect under transfer pricing bylaws article 23. Currently Saudi Arabia is only accepting applications for unilateral APAs. Refer to Saudi Request for Mutual Agreement Procedure – Taxpayer guidance and Saudi Tax Ruling Request Guideline. Moreover, please refer to the OECD MAP Profile for Saudi Arabia.
Simplifications
Saudi may rely on the OECD TPG.
Saudi transfer pricing domestic legislation does not contain specific guidance on Simplified and Streamlined Approach for Baseline Marketing and Distribution Activities transactions. However, it is currently under consideration and Saudi may rely on the OECD TPG.
Special Topics
Saudi Transfer Pricing Guidelines Chapter 8 “Specific Guidance: Intangibles”
Saudi Transfer Pricing Guidelines, Chapter 8 “Specific Guidance: Intangibles”, includes specific guidance on Intangibles. It includes a specific framework on relevant aspects of analysing Intangibles. In addition, Saudi Arabia takes guidance from the OECD Transfer Pricing Guidelines.
Saudi transfer pricing domestic legislation does not contain specific guidance on intra-group services transactions. Saudi may rely on the OECD TPG.
Saudi Transfer Pricing Guidelines, Chapter 7
Saudi Transfer Pricing Guidelines includes specific guidance on this topic on Chapter 7 “Specific Guidance: Financial Transactions”. For the financial transactions, the same initial rules apply: the conditions must be checked against the Arm’s Length Principle. As such, it provides additional guidance on various examples of financial transactions which related persons could enter into given their more specific nature. The guidance on Chapter 7 of the Saudi Transfer Pricing Guidelines follows the OECD TPG.”
Full OECD Questionnaire
Legal ReferenceSaudi Transfer Pricing Bylaw Article 1 (2)
A reference to the arm’s length principle is provided under article 1 (2) of the Saudi transfer pricing bylaws. The Arm’s length principle is originally in Article 63 para. “c” of the KSA Income Tax Law. Transfer Pricing By-Laws provide details regarding its application. There is also a reference to the KSA Income Tax By-Laws Article 10 (11) which states the Arm’s length principle in relation to related party expenses and mentions the basis for ZATCA to issue the Transfer Pricing By-Laws.
On 31/01/2019, Saudi Arabia issued transfer pricing bylaws and guidelines, which are mostly aligned with the OECD TPG
Legal ReferenceSaudi Transfer Pricing Bylaw 1 (26) Saudi Transfer Pricing Guidelines Chapter 3 Subjects
The definition of a related person is provided under article 1 (26) of the Saudi transfer pricing bylaws. (a) Related person means two or more natural persons if they are: (i) relatives through marriage or are otherwise relatives to the fourth degree; or (ii) partners in a partnership. (b) a natural person is considered related to a juridical person in any of the following circumstances: (i) if the natural person is a partner in a Partnership and he, either alone or together with a Related Person or Persons, directly, indirectly (or both) controls fifty percent (50%) or more of the voting rights, income, or capital of the Partnership. (ii) if the Person or a Related Person thereto is a shareholder in a Capital Company and he, either alone or together with a Related Person or Persons, directly, indirectly (or both) controls fifty percent (50%) or more of the voting rights, income or capital of the Capital Company. (iii) as for agencies administering property held in a trust, fund or any such similar arrangement, a natural person is considered related thereto if he benefits or is capable of benefiting from them, either alone or with a related Person or Persons. (iv) if the Person alone or jointly with a Related Person thereto directly or indirectly participates or is able to participate in the management, control or capital of a juridical person. (c) two or more juridical persons are considered Related Persons in any of the following cases: (i) they are Persons under Common Control. (ii) when the Person who controls or has the ability to control the business decisions of a juridical person has, alone or together with a Related Person, Effective Control over the other juridical person. (iii) when the Person who has Effective Control over a juridical person and the Person who has Effective Control of the other juridical person are Related Persons.
Legal ReferenceSaudi Transfer Pricing Bylaw Article 7 Saudi Transfer Pricing Bylaw Article 9 Saudi Transfer Pricing Guidelines 4.2 Step 2: selection of TP method.
If the taxpayer used Other Method other than the approved method, the taxpayer must refer to Article 9 from the Transfer Pricing Bylaws which state “A Taxable Person may apply a Transfer Pricing method other than the approved Transfer Pricing Methods provided. The Taxable Person must be able to demonstrate that under the facts and circumstances, none of the approved methods provides a reliable measure of an Arm’s-Length result and that the suggested method satisfies the provisions under Article 6 of the Bylaws.”
- CUP (provided)
- Resale Price (provided)
- Cost Plus (provided)
- TNMM (provided)
- Profit Split (provided)
- Other (provided)
Saudi Arabia’s Transfer Pricing Guidelines provide guidance on selecting the most appropriate method to determine the arm’s length price for a related party transaction. In addition, Saudi Arabia takes guidance from the OECD Transfer Pricing Guidelines.
- Hierarchy of methods (not selected)
- Most appropriate method (selected)
- Other (if so, please explain) (not selected)
There is no specific guidance in Saudi’s domestic legislation on commodity transactions.
Legal ReferenceSaudi Transfer Pricing Guidelines Chapter 4
Saudi Arabia Transfer Pricing Guidelines provide guidance on comparability analysis. In addition, Saudi Arabia takes guidance from the OECD Transfer Pricing Guidelines.
Legal ReferenceSaudi Transfer Pricing Bylaws Article 13 (c)
The comparable transaction information under Article 13 (c) of Saudi Transfer Pricing Bylaws states that the tax authority may accept the use of foreign comparable transactions by a taxable person in the event that domestic comparable transactions are not available or in the absence of domestic comparable transactions. With reference to Article 13 of the TP Bylaws that explains the comparable regions “The Authority may accept the use of foreign Comparable Transactions by a Taxable Person in the event that domestic Comparable Transactions are not available or absence of domestic Comparable Transactions. In such case, the Taxable Person must be able to demonstrate to the Authority upon its request that the foreign Comparable Transaction, or Transactions are consistent with the requirements set forth in (Chapter Three) of the Bylaws, and shall take into account the expected impact of geographic differences and other factors on the results of the foreign Comparable Transactions, including, without limitation, price and profitability.”
Legal ReferenceSaudi Transfer Pricing Bylaw Chapter 9
The Arm’s Length remuneration of a Controlled Transaction shall be determined by applying the method that, under the facts and circumstances, provides the most reliable measure of an Arm’s-Length result. Except and to the extent provided in Chapter 9 of the Bylaws, the most appropriate method shall be selected from the approved transfer pricing methods.
Legal ReferenceSaudi Transfer Pricing Guidelines Chapter 4 4.3.4. Sub step 4: Selection of comparable. Saudi Arabia Transfer Pricing Bylaws, Article 5 “Comparable Transactions”.
Comparability adjustment is performed to reduce the substantial differences (if any) between the situations being compared. In this respect, if material differences exist between the controlled and uncontrolled transactions that could materially affect the outcome of the transfer pricing analysis, it should be determined whether these comparability adjustments. Could be reliably performed otherwise the Uncontrolled Transaction cannot be used as comparable. Comparability adjustments to the financials of the comparable are solely allowed if they can be made with a high degree of accuracy and if the impact on the comparable is not material. Such adjustments should serve to improve the outcome of the analysis and eliminate potential smaller differences between the comparable. All comparability adjustments need to be properly substantiated by Taxpayers.
Legal ReferenceSaudi Transfer Pricing Guidelines Chapter 8 “Specific Guidance: Intangibles”
Saudi Transfer Pricing Guidelines, Chapter 8 “Specific Guidance: Intangibles”, includes specific guidance on Intangibles. It includes a specific framework on relevant aspects of analysing Intangibles. In addition, Saudi Arabia takes guidance from the OECD Transfer Pricing Guidelines.
Legal ReferenceAs per the updated Saudi Transfer Pricing Bylaw Article 23 “Advanced Pricing Agreement”.
Saudi transfer pricing domestic legislation does not contain specific guidance on intra-group services transactions. Saudi may rely on the OECD TPG.
Saudi follows the OECD TPG including the approach on low value-adding intra-group services.
Legal ReferenceSaudi Transfer Pricing Guidelines, Chapter 7
Saudi Transfer Pricing Guidelines includes specific guidance on this topic on Chapter 7 “Specific Guidance: Financial Transactions”. For the financial transactions, the same initial rules apply: the conditions must be checked against the Arm’s Length Principle. As such, it provides additional guidance on various examples of financial transactions which related persons could enter into given their more specific nature. The guidance on Chapter 7 of the Saudi Transfer Pricing Guidelines follows the OECD TPG.”
Legal ReferenceSaudi Income Tax Law (“Bylaws”), Articles 5 and 9
The loan charges rules are mentioned in Article 5 (Source of Income) in Saudi Income Tax Bylaw. There is an interest deductibility limitation rule in Article 9 of Saudi Income Tax By-Laws as follows: “Loan Charges (proceeds)) incurred during the tax year if related to income subject to tax, or the resultant of the following formula whichever is less: The taxpayer’s total income from loan charges, plus 50 percent of ( a - b). “a” = income subject to tax other than income from loan charges. “b” = expenses allowed under the Law other than loan charge expenses. Banks are not subject to this formula.
Saudi Arabia does not have domestic legislation or regulation on cost contribution agreements and Saudi may rely on the OECD TPG.
Legal ReferenceSaudi Transfer Pricing Bylaw Article16, article 17 and article 18 Saudi Transfer Pricing Guidelines - Chapter 5 “Transfer Pricing Documentation”
- Master file consistent with Annex I to Chapter V of the TPG (selected)
- Local file consistent with Annex II to Chapter V of the TPG (selected)
- Country-by-country report consistent with Annex III to Chapter V of the TPG (selected)
- Specific transfer pricing returns (separate or annexed to the tax return) (selected)
- Other (specify) (not selected)
Legal ReferenceSaudi Transfer Pricing Bylaw Article16, article 17 and article 18 Saudi Transfer Pricing Guidelines - Chapter 5 “Transfer Pricing Documentation” Saudi Transfer Pricing Guidelines Section 5.4 country-by-country reporting
The documentation requirements imposed by the Kingdom of Saudi Arabia (KSA) include the preparation of a Master File and a Local File for Taxpayers that meet the threshold. The documentation relating to Controlled Transactions shall be provided to the tax authority upon its request within the duration specified by the tax authority in the request, provided that such duration shall be no less than 30 days after the date of such request. In principle, the Ultimate Parent Entity (UPE) or Surrogate Parent Entity (SPE) should submit the CbCR. Thus, if the taxpayer is either the UPE or SPE, that taxpayer must submit a CbC Report to the tax authority within the 12-month period immediately following the end of the reporting year of its MNE group. However, according to the Bylaws, filing a CbC Report is not required in KSA if the consolidated group revenue is less than SAR 3,200,000,000 (approx. EUR 750 million) in the reporting year immediately preceding the current reporting year.
Saudi Arabia have regular penalties on tax compliance including on CbCr documentation.
Legal ReferenceSaudi Transfer Pricing Bylaw Article 19 (“Exemptions”) and section 5.3 of the TP guidelines
Exemption from transfer pricing documentation applies to natural persons (except Institutions), small enterprises who carries out controlled transactions, for which the total Arm’s Length value does not exceed SAR 6 million (approx. EUR 1.4 million) in a 12 month period.
Legal ReferenceSaudi Transfer Pricing Bylaw Article 23 “Advanced Pricing Agreement” Request for Mutual Agreement Procedure Tax Ruling Request Guideline (June 2020) Saudi Arabia OECD MAP Profile
Starting from January 2024 Advanced Pricing Agreement came into effect under transfer pricing bylaws article 23. Currently Saudi Arabia is only accepting applications for unilateral APAs. Refer to Saudi Request for Mutual Agreement Procedure – Taxpayer guidance and Saudi Tax Ruling Request Guideline. Moreover, please refer to the OECD MAP Profile for Saudi Arabia.
- Rulings (selected)
- Enhanced engagement or cooperative compliance programmes (not selected)
- Advance Pricing Agreements (APA) (selected)
- Unilateral APAs (selected)
- Bilateral APAs (not selected)
- Multilateral APAs (not selected)
- International Compliance Assurance Programme (ICAP) (not selected)
- Mutual Agreement Procedures (selected)
- Other (not selected)
Saudi transfer pricing domestic legislation does not contain specific guidance on Simplified and Streamlined Approach for Baseline Marketing and Distribution Activities transactions. However, it is currently under consideration and Saudi may rely on the OECD TPG.
Saudi may rely on the OECD TPG.
Saudi may rely on the OECD TPG.
KSA will only allow a downward corresponding adjustment if there is a DTA in place.
Legal ReferenceSaudi Transfer Pricing Guidelines 4.4 financial analysis 4.4.1 Arm’s length Range. Saudi Transfer Pricing Guidelines 6.1 “Implementation”
Saudi guidelines allow taxpayers to make year-end adjustments. If due to unforeseen circumstances the actual reported result falls outside the Arm’s Length Range, taxpayers can make a so-called year-end adjustment if the annual accounts have not yet been finalised. The guidelines also refer to the year-end adjustments that they are in principle allowed before closing the commercial accounts for the financial/accounting year
Most of Saudi tax treaties uses the pre-2010 OECD MTC, however, in around 16 treaties, the United Nations’ Force of Attraction approach is used.
- Article 7 as it read before 2010. (selected)
- Article 7 as it reads after 2010. (not selected)
- Other (selected)
Saudi applies the “separate entity approach”
Legal ReferenceIncome Tax Law Articles 5 (10)
KSA domestic law provides for the “limited Force of Attraction approach”.
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