Transfer Pricing Bylaws in the Kingdom of Saudi Arabia

On 4 July 2022, the Zakat, Tax and Customs Authority (ZATCA) in the Kingdom of Saudi Arabia (KSA) issued a public consultation document (PCD) proposing some amendments to the current Transfer Pricing (TP) Bylaws. The ZATCA set a deadline for members of the public and relevant stakeholders to submit their comments on the public consultation document by 30 July 2022. It is expected that the final Bylaws will be released imminently and will be applicable for accounting periods ending 31 December 2022. However, at this stage, whilst this is our expectation, the proposed amendments do not specify the effective date of its application.

Currently, the KSA TP Bylaws have a very limited application to 100% of Zakat paying entities, such that they are only confined to compliance with the Country-by-Country Reporting (CbCR) requirements for entities that meet a consolidated revenue threshold. Most of the other provisions in the KSA TP Bylaws are only applicable to Corporate Income Tax (CIT) payers, whether they are 100% foreign owned or partially Gulf Cooperation Council (GCC) owned and hence partially subject to CIT. However, through a significant amendment proposed in the KSA TP Bylaws proposed in the PCD, the ZATCA seeks to bring Zakat paying entities (hereinafter also referred to Zakat payers) within the ambit of the KSA TP Bylaws.  

In this publication we cover the proposed significant amendments impacting 100% of Zakat paying entities in KSA, as well as the various amended Articles of the KSA TP Bylaws and how Zakat paying entities may be impacted by these changes, illustrating these impacts through certain example scenarios and structures.