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Demystifying Transfer Pricing Methods in Saudi Arabia


In the dynamic landscape of transfer pricing, understanding the applicable methods is essential for ensuring compliance and avoiding disputes. In this article, we delve into the transfer pricing methods recognized and accepted in Saudi Arabia, highlighting their prioritization, administrative rules, and guidelines.

I. Applicable Methods:

Saudi Arabia aligns with the OECD Guidelines and allows the use of all OECD-recognized transfer pricing methods. The Transfer Pricing By-Laws, published in February 2019, outline the following methods:

1. Traditional Methods:

  a. Comparable Uncontrolled Price (CUP) method

  b. Resale Price (RP) method

  c. Cost Plus (CP) method

2. Transactional Profit Methods:

  a. Transactional Net Margin Method (TNMM)

  b. Profit Split (PS) method

II. Priority of Methods:

According to the Transfer Pricing By-Laws, all five OECD transfer pricing methods are approved for use in Saudi Arabia. The selection of the most appropriate method should be based on the specific circumstances of each transaction.

III. Administrative Rules and Guidelines:

The Saudi Arabian transfer pricing guidelines emphasize the importance of comparable transactions being in a similar industry and a geographical market comparable to Saudi Arabia. The General Authority of Zakat and Tax (GAZT) reserves the right to challenge transactions if the taxpayer fails to demonstrate the appropriateness of the chosen comparables. Notably, companies owned by natural persons may be considered as comparables, assuming that the ownership does not significantly impact the company’s profits.


Understanding the transfer pricing methods applicable in Saudi Arabia is crucial for businesses operating in the country. By aligning with the OECD Guidelines, Saudi Arabia provides a framework that allows for flexibility while ensuring compliance. Adhering to the administrative rules and guidelines, including selecting the most appropriate method for each transaction, is essential to mitigate transfer pricing risks. Stay informed, consult with experts, and navigate the complexities of transfer pricing methods to achieve transparency, compliance, and successful cross-border operations in Saudi Arabia.

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