Saudi Arabia: local rules

Saudi transfer pricing rules are in the Transfer Pricing Bylaws, issued by the ZATCA Board (Resolution 6-1-19, 31 January 2019) under the Income Tax Law (Royal Decree M/1 of 1425H) and amended by Board Resolution 8-2-23 of 20 March 2023. The Bylaws apply to anyone who is a taxpayer under the Income Tax Law, the zakat rules, or both (art. 2). Zakat payers are covered for years that start on or after 1 January 2024. Article 3 says terms between related persons must match what independent persons would agree, and article 4 lets ZATCA adjust the income tax base or zakat base if they do not. Related persons include 50% ownership or control, close family, effective control, and, for non-financial lenders, loans of 50% or more of a person's debt and capital or guarantees of 25% or more of its loans (art. 1). Two companies are not related only because the State owns both. Domestic deals are covered as well as cross-border deals. The ZATCA Transfer Pricing Guidelines explain the Bylaws but are not law.

Every taxpayer with related party deals files a Disclosure Form of Controlled Transactions with its return, within 120 days of the end of the fiscal year (art. 14). The Disclosure Form also holds the CbC notification section. A licensed chartered accountant in Saudi Arabia must also give a certificate that the group transfer pricing policy is followed without fail for the Saudi taxpayer (art. 14(c)). Taxpayers must keep a master file (art. 16) and a local file (art. 17) and hand them to ZATCA within a period it sets, never less than 30 days from the request (calendar days, Guidelines 5.2). The files are not filed with the return. Small entities are exempt from the two files: related party deals at arm's length value up to SAR 6m in 12 months for income tax and mixed taxpayers, and up to SAR 48m for zakat payers (art. 1(29) and art. 19). For zakat payers, ZATCA's Zakat General Guideline (section 3.4.10) says the files are required at SAR 100m or more in phase one (years starting from 1 January 2024) and above SAR 48m in phase two, which starts three years later. Natural persons who are not businesses, wholly State-owned companies exempt from zakat and investment funds are also exempt. ZATCA can still order documents in listed cases, such as deals with special economic zone entities, exempt persons or sham deals (art. 19(b)). Group companies that file one consolidated zakat return do not price deals among themselves, but they must disclose deals with companies owned below 100% (art. 19(c)).

Article 7 approves five methods: comparable uncontrolled price, resale price, cost plus, transactional net margin and profit split. No method has priority (art. 7(b)). Only one method is needed, and if ZATCA finds the taxpayer's chosen approved method meets the rules, it must accept that method (art. 8). Another method is allowed if the taxpayer proves the approved ones do not give a reliable result (art. 9). ZATCA cannot adjust a result that is inside the arm's length range, and it may move one outside the range to a point inside it (art. 12). The Guidelines call the interquartile range the right range and say ZATCA expects the median to be used unless there is proof otherwise. They also say the full benchmark should be updated every 3 years. Foreign comparables are accepted only if no local ones exist, and the taxpayer must prove they are comparable (art. 13).

The Bylaws have no separate penalty list. The Income Tax Law and zakat rules apply. If terms are not arm's length, ZATCA can adjust the tax base or zakat base (art. 4). A late income tax return costs the higher of 1% of total revenue (capped at SAR 20,000) or a share of the unpaid tax: 5% for up to 30 days of delay, 10% over 30 days, 20% over 90 days and 25% over 365 days, and late payment costs 1% of the unpaid tax for each 30 days (ZATCA Simplified Guideline for Income Tax). A false or fraudulent filing costs 25% of the tax difference. For zakat, a late return lets ZATCA reassess for 10 years instead of 5 (Zakat Collection Regulation art. 106); no fixed late filing fine was found in that Regulation. No specific fine for a missing Disclosure Form, certificate, master file, local file or CbC report was confirmed.

No Pillar Two law has been enacted in Saudi Arabia, and no draft IIR, UTPR or domestic minimum top-up tax was found on the ZATCA or Ministry of Finance sites as of 26 October 2026. Saudi Arabia is an OECD Inclusive Framework member. The draft new Income Tax Law of October 2023 did not mention Pillar Two. A secondary source says ZATCA's special economic zone guideline says zone incentives will be reviewed when Pillar Two is applied. There is no registration or return deadline.

The CbC report is required for groups with consolidated revenue above SAR 3.2bn in the year before the reporting year (art. 18(g)). The ultimate or surrogate parent in Saudi Arabia files it within 12 months of the group's year end (art. 18(d)). Other Saudi taxpayers file it if the parent is not required to file, or sits in a country with no working information exchange with Saudi Arabia (art. 18(b)), and the group may name one Saudi entity to file for all (art. 18(c)). Each Saudi taxpayer in such a group must notify ZATCA of the reporting entity within 120 days of the end of its own tax or zakat year (art. 18(f)). Advance pricing agreements (art. 23) need deals of at least SAR 100m, a request at least 12 months before the first year, and run for 3 years. The weekend is Friday and Saturday, but the rules only move a return deadline that ends on an official holiday, so dates on a Friday or Saturday are shown as they fall. A new Income Tax Law was published in draft in October 2023 and was not found to be enacted; ZATCA still cited the 120 day rule in April 2026.