Transfer Pricing Rules in Saudi Arabia
Reviewed by the Commoner Law Editorial Team. Sourced from Saudi royal decrees, regulations, and ministerial decisions. Written in plain language for general understanding — this is educational content, not legal advice. Our editorial standards
What is this right?
Saudi Arabia requires transactions between related parties to be priced at arm's length — and ZATCA has ramped up enforcement significantly since the 2019 bylaws:
- 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 (CbCR).
- CbCR threshold: Country-by-Country Reports are required for groups with consolidated revenue of SAR 3.2 billion (approximately USD 850 million) or more.
- Disclosure form: Taxpayers with related-party transactions must submit a Transfer Pricing Disclosure Form with their annual tax return on the ZATCA portal.
- Penalties: Failure to comply results in adjustments to taxable income, additional tax, and penalties. ZATCA increasingly uses FATOORA data and cross-border information exchange to identify non-compliance.
When does it apply?
- Your company conducts transactions with related parties — parent companies, subsidiaries, affiliates, or entities under common control.
- You are part of a multinational group operating in Saudi Arabia.
What to Do If ZATCA Challenges Your Transfer Pricing Arrangements in Saudi Arabia
- Identify all related-party transactions and document the pricing methodology used for each.
- Prepare and maintain Master File and Local File documentation — ZATCA follows OECD guidelines.
- Submit the Transfer Pricing Disclosure Form with your annual tax return through the ZATCA portal.
- Engage a transfer pricing specialist — ZATCA auditors are increasingly sophisticated, and Saudi-specific Zakat calculations add complexity that pure OECD guidance does not cover.
What should you NOT do?
- Do not ignore transfer pricing requirements — ZATCA actively audits related-party transactions and shares data with other tax authorities under BEPS agreements.
- Do not assume small transactions are exempt — all related-party transactions must comply with the arm's length principle regardless of size.
- Do not wait until an audit to prepare documentation — it must be ready at the time of filing and available upon ZATCA request within 30 days.
Common Questions
When does it apply — transfer pricing rules?
Your company conducts transactions with related parties — parent companies, subsidiaries, affiliates, or entities under common control.You are part of a multinational group operating in Saudi Arabia.
What should I do if ZATCA is auditing my multinational company's related-party pricing in Saudi Arabia?
Identify all related-party transactions and document the pricing methodology used for each.Prepare and maintain Master File and Local File documentation — ZATCA follows OECD guidelines.Submit the Transfer Pricing Disclosure Form with your annual tax return through the ZATCA portal.Engage a transfer pricing specialist — ZATCA auditors are increasingly sophisticated, and Saudi-specific Zakat calculations add complexity that pure OECD guidance does not cover.
What should you NOT do — transfer pricing rules?
Do not ignore transfer pricing requirements — ZATCA actively audits related-party transactions and shares data with other tax authorities under BEPS agreements.Do not assume small transactions are exempt — all related-party transactions must comply with the arm's length principle regardless of size.Do not wait until an audit to prepare documentation — it must be ready at the time of filing and available upon ZATCA request within 30 days.