Transfer Pricing Rules
Written in plain language for general understanding. This is educational content, not legal advice. Based on Saudi royal decrees, regulations, and ministerial decisions.
Saudi National Law
What is this right?
Saudi Arabia requires transactions between related parties to be priced at arm's length:
- Arm's length principle: Transactions between related companies must be priced as if the parties were independent and dealing at market rates.
- Documentation: Companies must prepare and maintain transfer pricing documentation — a Master File, Local File, and (for large groups) a Country-by-Country Report.
- Filing thresholds: Country-by-Country Reports are required for groups with consolidated revenue of SAR 3.2 billion or more.
- Disclosure form: Taxpayers must submit a Transfer Pricing Disclosure Form with their annual tax return.
- Penalties: Failure to comply can result in adjustments to taxable income, additional tax, and penalties.
When does it apply?
- Your company conducts transactions with related parties (parent companies, subsidiaries, affiliates).
- You are part of a multinational group operating in Saudi Arabia.
What should you do?
- Identify all related-party transactions and document the pricing methodology used.
- Prepare and maintain Master File and Local File documentation.
- Submit the Transfer Pricing Disclosure Form with your annual tax return.
- Engage a transfer pricing specialist for complex intercompany arrangements.
What should you NOT do?
- Do not ignore transfer pricing requirements — ZATCA actively enforces these rules.
- Do not assume small transactions are exempt — all related-party transactions must comply with the arm's length principle.
- Do not wait until an audit to prepare documentation — it must be ready at the time of filing.
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