Saudi Arabia’s Transfer Pricing Bylaws are substantially harmonized with the OECD guidelines. These bylaws have undergone some adjustments following a public comment period, although no major deviations from international standards are observed.
In Saudi Arabia’s TP Bylaws, the definition of related parties encompasses a broad range of relationships, including natural persons, legal persons, and effective control. Effective control is defined as the ability to influence another entity’s business decisions directly or indirectly through various means, including management agreements, trust arrangements, equity control, and commercial connections.
Saudi Arabia introduced Transfer Pricing Bylaws in February 2019, accompanied by the 2019 Transfer Pricing Guidelines. The latter offer guidance on implementing the Bylaws. A second edition of the guidelines was published in June 2020, maintaining consistency with the Bylaws.
Saudi Arabia has yet to implement rules regarding advance pricing agreements.
Transfer pricing audit practices in Saudi Arabia are evolving, with an emphasis on entities in continuous loss positions and specific industries like energy, consumer goods, and technology.
Under Article 18 of the TP Bylaws, ultimate or surrogate parent entities in Saudi Arabia must submit Country-by-Country (CbC) reports. TP Bylaws require every taxpayer with related-party transactions exceeding SAR 6 million to maintain a Master File and Local File.
Banks and insurance companies in Saudi Arabia with shares listed on the Saudi Stock Exchange must publish financial statements following IFRS. Other listed and unlisted companies should adhere to accounting standards issued by the Saudi Organization for Certified Public Accountants (SOCPA).
TP documentation is encouraged to be maintained and submitted in Arabic. English or other languages may be accepted, but compliance with language requirements is essential.
Taxpayers are obliged to submit TP documentation within 30 days, with extensions possible.
Taxpayers must retain TP documentation for five years, in accordance with the statute of limitations.
Tax evasion, including knowingly hiding information, leads to a 25% penalty on excess tax charged.