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Unlocking Transfer Pricing Insights in Saudi Arabia: Special Considerations


Transfer pricing (TP) plays a crucial role in determining the pricing of intercompany transactions, particularly in the context of multinational enterprises (MNEs). In Saudi Arabia, the transfer pricing regime is aligned with international standards and follows the arm’s length principle. However, there are specific areas that require special consideration. This article will delve into the key considerations for intangible assets, intra-group services, cost contribution arrangements, financial services and transactions, and digital economy transactions in Saudi Arabia.

I. Intangible Assets:

When dealing with intangible assets, the Saudi Arabian transfer pricing guidelines emphasize the concept of the “economic owner.” According to these guidelines, the economic owner of intangibles is the party that exercises control over the DEMPE functions (development, enhancement, maintenance, protection, and exploitation) of the intangible asset. This owner is the party making significant decisions, managing and bearing the related risks, regardless of the legal ownership. The guidelines acknowledge that the legal and economic ownership of intangibles may not always align.

II. Intra-group Services:

Intra-group service transactions are subject to the arm’s length principle in Saudi Arabia. However, the domestic legislation does not provide specific guidance on such transactions. Consequently, Saudi Arabia tends to rely on the guidelines issued by the Organization for Economic Cooperation and Development (OECD) to determine the arm’s length nature of intra-group services.

III. Cost Contribution Arrangements:

Saudi Arabia’s transfer pricing legislation and By-Laws do not specifically address cost contribution arrangements (CCAs). As a result, there are no specific rules or regulations governing CCAs in the Saudi Arabian transfer pricing regime.

IV. Financial Services and Transactions:

The deduction of interest expense in Saudi Arabia is subject to certain limitations. Taxpayers can deduct the lesser of the actual expense or the interest income, plus 50% of taxable income before interest income and interest expense. Moreover, according to the Companies Regulations, if a company’s accumulated losses exceed 50% of its share capital, a shareholders’ meeting must be convened to determine whether to continue the business, with the resolution published in the official gazette.

The Saudi Arabian transfer pricing regime also requires financial institutions, including custodial institutions, depository institutions, investment entities, and specified insurance companies, to comply with the Common Reporting Standard (CRS) guidelines issued by the Saudi Arabian Tax Authority (ZATCA). These guidelines mandate an annual review to identify reportable persons and report their tax residency status to the ZATCA.

V. Digital Economy Transactions:

Currently, Saudi Arabia does not impose a digital services tax. However, digital commerce and services are generally subject to value-added tax (VAT).


Saudi Arabia’s transfer pricing regime adheres to the arm’s length principle, ensuring consistency with international standards. However, one should be aware of the special considerations in areas such as intangible assets, intra-group services, cost contribution arrangements, financial services and transactions, and digital economy transactions in Saudi Arabia.

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