Saudi Arabia


The Kingdom of Saudi Arabia first introduced Transfer Pricing Regulations in 2018.

The first edition of the Transfer Pricing Guidelines was published in the country in March 2019. In May 2020, the GAZT (General Authority of Zakat and Tax) published the second edition of these Transfer Pricing Guidelines with several updates.

Related Parties

The definition of a “related person” is provided in Article 1 (25) of the Transfer Pricing Regulations in Saudi Arabia.

  1. A related person refers to two or more natural persons who are:
    • Related through marriage or are relatives of the fourth degree; or.
    • Partners in a partnership.
  2. An individual is deemed to be related to a legal person in any of the following circumstances:
    • If the individual is a partner in a partnership and, either alone or together with a related person(s), directly, indirectly (or both) controls fifty percent (50%) or more of the voting rights, income, or capital of the partnership.
    • If the person or a related person is a shareholder of a corporation and this, alone or together with a related person(s), directly, indirectly (or both) controls fifty percent (50%) or more of the voting rights, income, or capital of the corporation.
    • Concerning agencies administering assets held in a trust, fund, or any other similar arrangement, an individual is deemed to be related thereto if this benefits or is able to deepen from them, either alone or with a related person(s).
    • If the person alone or together with a related person directly or indirectly participates or may participate in the management, control, or capital of a legal person.
  3. Two or more legal persons are considered related persons in any of the following cases:
    • They are persons under common control.
    • When the person who controls or is able to control the business decisions of a legal person has, alone or together with a related person, effective control over the other legal person.
    • If the person who has effective control over one legal person and the latter are related persons.

Transfer Pricing Methods

The pricing methods recognized in Saudi Arabia are as follows:

  • Comparable Uncontrolled Price Method.
  • Cost Plus Method.
  • Resale Price Method.
  • Profit Split method.
  • Transactional Net Margin Method.

If the taxpayer used a different method other than the approved one, it should refer to Article 9 of the Transfer Pricing Regulations, which states that “a taxpayer may apply a different Transfer Pricing method than those provided for.”

Transfer Pricing Documentation

Multinational companies in Saudi Arabia are required to prepare and maintain five Transfer Pricing documents: a Controlled Transaction Form, a Transfer Pricing Affidavit, a Saudi Local Report, a Group Master File, and a Country-by-Country Report, which must be prepared and updated annually.

Controlled Transaction Form

All taxpayers with related party transactions must file to the GAZT, along with their annual income tax return, a form including details of their related party transactions, regardless of the value of the transactions.

This form must be filed along with the tax return within 120 days after the end of the fiscal year. For companies with a financial year ending December 31, 2018, the first disclosure is required before April 30, 2019.

It must include an affidavit from an auditor licensed in the KSA certifying the taxpayer’s consistent application of the Transfer Pricing Policy.

Local Report and Master File

Taxpayers with related party transactions with an annual value exceeding six million Saudi Arabian riyal ($1.6 million) must prepare and maintain a master file containing information on the group’s global business transactions and Transfer Pricing policies and a local report containing detailed information on all controlled transactions.

Country by Country Report

The Article 3 notification must be filed by all taxpayers in KSA (which is part of an MNE Group with a consolidated group income exceeding the threshold of SAR 3.2 thousand million) through GAZT’s Automatic Exchange of Information (AEOI) portal.

Transfer Pricing Sanctions

There are no penalties specified in the Pricing Guidelines for any non-compliance with the requirements. Conversely, GAZT reserves the right to impose penalties according to current tax legislation, and consequently, penalties may be applied for any adjustments to the tax liability.

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 Author:       Wolfgang Hartl
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