TRANSFER PRICING LAW

The price of transactions between related people or persons under shared control is characterised as transfer pricing. The significance of Transfer Pricing Bylaws, within the framework of Saudi Arabia’s Corporate Laws & legislation, stems from the need to apply and enforce the Arm’s Length Principle to transactions between related parties or people under shared control as though they were undertaken between independent parties.

HIGHLIGHTS OF THE TRANSFER PRICING LAW

The Bylaws cover instances in which the commercial or financial conditions made or imposed by two or more related individuals differ from those made or imposed by independent persons in the same transaction.

The Transfer Pricing Bylaws introduce new compliance requirements that affect all taxpayers in Saudi Arabia. The key obligations are:

Disclosure requirement.
Master file and local file.
Country-by-country reporting.
Penalties for non-compliance.

ISSUER OF THE TRANSFER PRICING LAW

The Transfer Pricing Bylaws are administered by the General Authority of Zakat and Tax (GAZT), the government agency responsible for tax-related matters in the Kingdom.

WHO IS SUBJECT TO THE ‘TRANSFER PRICING LAW’?

The Transfer Pricing Law, including the associated Transfer Pricing Bylaws in Saudi Arabia, applies primarily to multinational enterprises (MNEs) and related parties engaged in cross-border transactions. The key subjects subject to transfer pricing regulations typically include:

Multinational Enterprises (MNEs).
Parent companies, subsidiaries, affiliates, and other entities within the same corporate group.
Entities Engaged in Cross-Border Transactions involving goods, services, loans, or intangible assets between related entities in different countries.
Entities with Significant Intercompany Transactions.
Large corporations.

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TRANSFER PRICING LAW