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Understanding Tax Law in Saudi Arabia: Guidelines for Related-Party Transactions
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Demystifying Transfer Pricing in Saudi Arabia: Understanding the Tax Law


A comprehensive understanding of the relevant tax law is crucial when navigating transfer pricing regulations in Saudi Arabia. This article delves into the statutory provisions, regulations, and case law that impact transfer pricing practices in the country, shedding light on the arm’s length principle, related-party definitions, documentation requirements, and the absence of specific transfer pricing cases.

I. Statute and Regulations:

The Saudi Arabian tax law explicitly addresses transactions between related parties and emphasizes the application of the arm’s length principle. Article 63(c) empowers the General Authority of Zakat and Tax (GAZT) to re-allocate revenues and expenses in related-party transactions to reflect outcomes that would have occurred between independent parties.

Key provisions include:

– Article 64, which defines related parties.

– Article 58, requiring taxpayers to maintain documentation in Arabic to support the precise determination of tax payable.

– Article 61, granting the GAZT the authority to examine a taxpayer’s records. These articles empower the GAZT to request underlying documentation and make income adjustments based on its interpretation of the arm’s length principle, which may deviate from OECD guidance.

– Royal Decree No. M/113 of 25 July 2017, amending the income tax law, outlining penalties, and appeal procedures.

– Transfer Pricing By-Laws, issued in their final form on 15 February 2019, providing comprehensive guidelines for transfer pricing practices.

– Guidelines on advance rulings on income tax and VAT issues, issued on 30 July 2019 and updated on 15 July 2020, offering further clarity and guidance.

II. Case Law:

To date, no specific transfer pricing cases have been brought before the courts in Saudi Arabia. While case law serves as a valuable source of precedent and interpretation, its absence in transfer pricing underscores the importance of adhering to the statutory rules, regulations, and guidelines provided by the GAZT.


A solid understanding of the relevant tax law is essential for businesses involved in related-party transactions in Saudi Arabia. The statutory provisions, regulations, and guidelines set forth by the GAZT establish the framework for applying the arm’s length principle and determining the tax treatment of related-party transactions. While case law specific to transfer pricing is yet to emerge, adherence to the existing regulations and guidelines is crucial to ensure compliance and mitigate potential tax risks. Stay informed and navigate transfer pricing complexities effectively in Saudi Arabia by keeping up to date with the evolving tax landscape and consulting with experts in the field.

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