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Saudi Arabia – Transfer Pricing (2025)

Saudi Arabia’s domestic transfer pricing framework is grounded in the arm’s length principle as set out in the KSA Income Tax Law and further detailed in specific bylaws and guidelines. The arm’s length principle is originally established in Article 63 para. “c” of the KSA Income Tax Law, and Saudi Transfer Pricing Bylaws were issued on 31/01/2019 to provide implementation details. The Income Tax By-Laws also contain references that support the Bylaws, in particular Article 10 (11). The Transfer Pricing Bylaw explicitly references the arm’s length principle in Saudi Transfer Pricing Bylaw Article 1 (2).

Arm’s length principle and the role of the OECD Guidelines

The Saudi Transfer Pricing Bylaws and Saudi Transfer Pricing Guidelines are largely aligned with the OECD Transfer Pricing Guidelines (TPG). The domestic rules rely on the OECD TPG as interpretative guidance and as a source of best practice where local legislation is silent. However, compliance obligations and binding measures derive from Saudi law and the Bylaws and Guidelines (for example Saudi Transfer Pricing Bylaw Article 1 (2)), not from the TPG directly.

The definition of related persons for transfer pricing purposes is set out in Saudi Transfer Pricing Bylaw Article 1 (26) and elaborated in Saudi Transfer Pricing Guidelines Chapter 3 (Subjects). The definition covers three main situations: (a) two or more natural persons are related if they are relatives through marriage or otherwise related up to the fourth degree, or if they are partners in a partnership; (b) a natural person is considered related to a juridical person in several circumstances, including where the natural person is a partner in a Partnership and alone or together with a Related Person(s) directly or indirectly controls fifty percent (50%) or more of the voting rights, income, or capital of the Partnership; where the Person or a Related Person is a shareholder in a Capital Company and alone or with a Related Person(s) directly or indirectly controls fifty percent (50%) or more of the voting rights, income or capital of the Capital Company; in trust-like arrangements where the natural person benefits or may benefit either alone or with a Related Person(s); or where the Person alone or jointly with a Related Person 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 if they are Persons under Common Control; 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; or when the Persons who have Effective Control over each of two juridical persons are Related Persons.

Methods and rules for application

Saudi legislation provides the commonly accepted transfer pricing methods. The Saudi Transfer Pricing Bylaw identifies Comparable Uncontrolled Price (CUP), Resale Price, Cost Plus, Transactional Net Margin Method (TNMM) and Profit Split as approved methods (Saudi Transfer Pricing Bylaw Article 7; Saudi Transfer Pricing Bylaw Article 9). The Guidelines (Step 2: selection of TP method) explain selection of the most appropriate method. The Bylaw also permits the use of an “Other Method” where a Taxable Person can demonstrate that, under the facts and circumstances, none of the approved methods provides a reliable arm’s length result and that the proposed alternative method meets the requirements under Article 6 of the Bylaws (Saudi Transfer Pricing Guidelines 4.2; Saudi Transfer Pricing Bylaw Article 9). Saudi Arabia follows the “most appropriate method” principle in alignment with the OECD approach rather than a strict statutory hierarchy.

Comparability analysis and ranges

Saudi Transfer Pricing Guidelines Chapter 4 follow the comparability analysis principles of Chapter III of the OECD TPG. Saudi Transfer Pricing Bylaws Article 13 (c) indicates a preference for domestic comparables; the tax authority may accept foreign comparables only if domestic comparables are not available and the taxpayer can demonstrate consistency with Chapter Three requirements and account for geographic and other differences affecting price and profitability. Secret comparables are not permitted. Saudi Transfer Pricing Bylaw Chapter 9 contemplates the use of an arm’s length range and statistical measures where appropriate and requires the selection of the method that provides the most reliable arm’s length measure. Comparability adjustments are required when material differences exist and can be applied only where adjustments can be made with a high degree of accuracy and are not material; adjustments must be properly substantiated by taxpayers (Saudi Transfer Pricing Guidelines Chapter 4; Saudi Transfer Pricing Bylaws, Article 5 “Comparable Transactions”).

Documentation and reporting

The Saudi framework requires transfer pricing documentation for taxpayers meeting thresholds: a Master File, a Local File consistent with Annex I and II of Chapter V of the OECD TPG, and a Country-by-Country Report (CbCR) consistent with Annex III (Saudi Transfer Pricing Bylaw Article 16, Article 17 and Article 18; Saudi Transfer Pricing Guidelines Chapter 5). The CbCR should be filed by the Ultimate Parent Entity (UPE) or Surrogate Parent Entity (SPE) within 12 months after the end of the reporting fiscal year of the MNE group; filing in Saudi Arabia is not required if the group’s consolidated revenue in the preceding reporting year is less than SAR 3,200,000,000 (approximately EUR 750 million) (Saudi Transfer Pricing Guidelines Section 5.4). Documentation on controlled transactions must be provided to the tax authority upon request within the period specified in the request, which shall not be less than 30 days from the request date. Exemptions to documentation obligations are set out in Saudi Transfer Pricing Bylaw Article 19 (“Exemptions”) and section 5.3 of the Guidelines: natural persons (except Institutions) and small enterprises are exempt when total arm’s length value of controlled transactions does not exceed SAR 6,000,000 (approx. EUR 1.4 million) in a 12-month period. The profile does not provide specific guidance on the language of documentation, standardized submission forms or detailed filing formats; for such procedural specifics “No se proporciona guía doméstica específica en el perfil” and taxpayers should consult administrative guidance from ZATCA and the OECD TPG where needed.

Safe harbours, exemptions and materiality

The country profile indicates that Saudi Arabia does not provide general safe harbours or other sectoral simplification measures in its domestic transfer pricing framework; therefore there are no specific safe harbour regimes published in the profile. Exemptions from documentation described above are the principal simplification measures referenced. For other simplifications or materiality thresholds beyond those explicitly stated, no domestic guidance is provided in the profile and the OECD TPG should be consulted.

APAs and MAPs; procedures and timing

Advanced Pricing Agreements are regulated under Saudi Transfer Pricing Bylaw Article 23 “Advanced Pricing Agreement”. From January 2024 this provision has practical effect; currently Saudi Arabia accepts applications for unilateral APAs only. The jurisdiction provides mechanisms for rulings and for Mutual Agreement Procedures (MAPs) and has published guidance such as the Tax Ruling Request Guideline (June 2020) and the Saudi Request for Mutual Agreement Procedure – Taxpayer guidance; the OECD MAP profile for Saudi Arabia is also a relevant reference. The profile does not set out detailed processing times, procedural timelines or specific admission criteria for APAs and MAPs; therefore, “No se proporciona guía doméstica específica en el perfil” on procedural timing, and taxpayers should consult ZATCA administrative guidance and the OECD materials for further detail.

Penalties and other considerations

The profile does not list transfer pricing-specific penalties but indicates that regular tax compliance penalties apply, including penalties that may affect CbCR obligations. Saudi guidelines allow year-end adjustments: taxpayers may make year-end adjustments before finalising annual accounts if actual results fall outside the Arm’s Length Range due to unforeseen circumstances (Saudi Transfer Pricing Guidelines 4.4.1 and 6.1). Secondary adjustments are not provided for in the profile. Regarding corresponding downward adjustments, Saudi Arabia permits a downward corresponding adjustment only if a Double Taxation Agreement (DTA) is in place. On characterization and re-characterization, the standard rules apply through the arm’s length principle and general tax powers; the profile does not provide additional specific re-characterization rules beyond those embedded in the Bylaws and Guidelines.

Attribution of profits to permanent establishments (PEs)

Most Saudi tax treaties contain Article 7 as it read before 2010, and Saudi Arabia applies a separate entity approach rather than the Authorized OECD Approach (AOA); around 16 treaties apply the United Nations’ Force of Attraction approach. Domestic law references relevant PE matters in Income Tax Law provisions such as Article 5 (10). The profile states that Saudi Arabia does not apply the AOA for treaties containing Article 7 as it read before 2010 and follows the separate entity approach.

Conclusion

Saudi Arabia’s transfer pricing regime, established through the Saudi Transfer Pricing Bylaws and Guidelines, is largely consistent with the OECD TPG in substance and methodology. It provides detailed definitions of related parties, recognises the standard suite of transfer pricing methods while allowing alternatives under strict conditions, requires Master File/Local File/CbCR with defined thresholds and exemptions, and prescribes comparability and documentation standards consistent with OECD practice. Certain procedural specifics (for example, detailed APA/MAP processing times, explicit administrative forms, language requirements for documentation and any sectoral safe harbours) are not set out in the country profile and therefore “No se proporciona guía doméstica específica en el perfil”; practitioners should refer to ZATCA administrative guidance and the OECD TPG for further technical and procedural clarification.

References

For the OECD transfer pricing country profiles see https://www.oecd.org/en/topics/sub-issues/transfer-pricing/transfer-pricing-country-profiles.html

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La información presentada en este perfil se ha generado tomando como base datos y contenidos publicados por la OCDE. Si bien se busca reflejar fielmente la información disponible, no se garantiza su exactitud ni exhaustividad y se recomienda consultar las fuentes originales de la OCDE para fines oficiales o de investigación.