Saudi Arabia: Proposed amendments to transfer pricing bylaws; comments due 30 July 2022

The proposed amendment seeks to bring Zakat payers within the ambit of transfer pricing bylaws.

Comments due 30 July 2022

The Zakat, Tax and Customs Authority (ZATCA) issued an amended draft of transfer pricing bylaws and invited comments from the public. The deadline for submitting feedback is 30 July 2022.

The proposed amendment seeks to bring Zakat payers within the ambit of transfer pricing bylaws that were earlier applicable to taxpayers and mixed companies only. The amended transfer pricing bylaws would be effective pursuant to issuance of a board resolution by ZATCA. 


Applicability of the transfer pricing bylaws to Zakat payers

Currently, the transfer pricing bylaws are applicable to all taxable persons under the income tax law and mixed-ownership entities (Zakat and tax). The entities that are subject to Zakat are only required to submit a country-by-country (CbC) report and CbC report notification (depending on annual consolidated revenues).

The amendment proposes to include 100% Zakat paying entities under the definition of “taxable persons.” Thus, all provisions of the transfer pricing bylaws would apply to Zakat payers defined in the Zakat regulations.

Change in definition of “related persons”

The term “related persons” includes persons who have the ability to control business. 

The amendment proposes to add “effectively” before “control” in the definition of related persons.

Threshold for transfer pricing documentation and exceptions

 The requirement to maintain a Master file and Local file would not necessary for the following:

  • Natural persons (except institutions)
  • Small size enterprises (entities with arm’s length value of “controlled transactions” not exceeding SAR 6 million (U.S. $1.6 million) in a 12-month period

Thus, Zakat payers including institutions would be required to maintain Master file and Local file if the related party transactions exceed SAR 6 million in the tax / Zakat year.

Transfer pricing disclosure form to be filed with annual income tax / Zakat declaration

All Zakat payers would be required to submit specified disclosure forms in respect of “controlled transactions,” along with their annual income tax declaration (within 120 days following the end of their fiscal year).

The disclosure form would include details of all “controlled transactions” including non-monetary transactions. Further, details of total revenue, total expenses, net profit or loss, assets, total funds, advance payment, debt, and other components of the Zakat base including amounts deductible from Zakat base would be reported.

The disclosure form forming part of the annual tax declaration must be submitted electronically in Arabic only by every person engaged in controlled transactions, irrespective of their value.

Moreover, tax and Zakat payers must submit an affidavit from their certified accountant, declaring that their transfer pricing policy is consistently applied in relation to the taxpayer in Saudi Arabia.

Permanent establishments

The tax base of a permanent establishment would be determined according to the arm’s length principle.  Further, it would be clarified that permanent establishments may deduct expenses in accordance with related international laws, regulations, and agreements.

New definitions

 The following new definitions would be added:

  • “Zakat Collection Law” means the regulations issued by Ministerial Resolution No. 2216 and any modifications thereto.
  • “Declaration” means the tax declaration for the persons concerned with the declaration obligations for tax purposes under the law, and the Zakat declaration for the persons concerned with the declaration obligations for the purposes of Zakat under the Zakat collection regulation.
  • “Group” means two or more related persons who are obligated to prepare consolidated financial statements in accordance with the relevant accounting standards, or who will be obligated to prepare consolidated financial statements in event that one of these persons is an entity listed in the financial market.


Provisions of the income tax law (and income tax regulations) and Zakat regulations would be construed and interpreted in a manner consistent with the transfer pricing bylaws.  Further, the audit rules and appeal procedure defined in Zakat regulations may apply.

Other changes

The term “multinational enterprise group” would be replaced with “multinational group” in the transfer pricing bylaws.   

KPMG observation

As a member state of the G20, Saudi Arabia had already endorsed BEPS Pillar One and Pillar Two.  ZATCA has become more cognizant of the importance of tax collection, particularly as the Saudi Arabian government is seeking to diversify its revenue base and is moving away from being an oil-only based economy.

The proposed applicability of transfer pricing bylaws to Zakat payers demonstrates ZATCA’s commitment to bring transformation in the taxation system of the country. 

For more information, contact the Global Leader of KPMG’s Global Transfer Pricing Services:

Komal Dhall |


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