Transfer Pricing Solutions and Rules - Saudi Arabia
In February 2019, the Zakat Tax and Customs Authority (ZATCA) in the Kingdom of Saudi Arabia (KSA) formally released the final Transfer Pricing Bylaws (TP Bylaws). The ZATCA also subsequently issued the first edition of the Transfer Pricing Guidelines in March 2019 (2019 TP Guidelines). The 2019 TP Guidelines serves to provide guidance on how the TP Bylaws are to be applied in the KSA.
On 1 June 2020, the ZATCA issued the second edition of the Transfer Pricing Guidelines (2020 TP Guidelines). The 2020 TP Guidelines do not usher in any significant changes/additions to the application of the TP Bylaws.
The arm’s length principle can be found in article 10 of the Bylaws to the Income Tax Law (Income Tax Bylaws). This regulation allows the ZATCA to disallow any expense that is caused by applying non-arm’s length pricing between related parties.
This article already announced in 2014 that the ZATCA would issue detailed guidance on this topic aligned with international standards. Accordingly, the 2019 and 2020 TP Guidelines were issued in March 2019 and in June 2020, respectively.