Saudi Arabia Transfer Pricing: ZATCA Bylaws and the Arabic File

Saudi Arabia’s transfer pricing regime is the arm’s-length provisions of the Income Tax Law, implemented through ZATCA’s transfer-pricing bylaws and their implementing regulations — the framework that became the Kingdom’s first standalone TP instrument when the bylaws were issued in the 2023 period and applied from the 2024 tax period onwards. The bylaws are OECD-aligned in method, comparability and documentation architecture, and they add three domestic features that change how the file is built: the Arabic-language requirement, the filing alongside the annual return, and a related-party scope that reaches the domestic transactions as well as the cross-border ones. For the Indian group with a Saudi affiliate — the energy and contracting entity, the services company, the Vision-2030-era regional setup — the Saudi side is a young regime being administered with earnest, and the file’s form matters as much as its substance.

The framework

Element	The content
The authority	The Zakat, Tax and Customs Authority (ZATCA)
The statute	The Income Tax Law (the consolidated text, issued by royal decree — the decree reference is not verified in our registry) supplies the charging and deductibility framework; the bylaws and their implementing regulations supply the TP rules
The standard	The price, margin or profit allocation of a related-party transaction is what independent parties would have agreed in comparable circumstances; ZATCA adjusts the taxable income where the recorded consideration is not arm’s length
The scope	Transactions between a taxpayer and related parties — cross-border and domestic — above the bylaws’ thresholds (the ownership and control limbs are not verified)
The methods	The OECD set — the CUP, the TNMM (the workhorse), the cost plus, the resale price, the profit split — on the best-method rule, the interquartile range, the Saudi entity typically tested
The documentation	The local file, the master file for qualifying groups, and the country-by-country report with a notification — prepared in Arabic, filed with ZATCA alongside the annual return, and produced on request within the bylaws’ periods
The relief	MAP under the bilateral treaties. Safe harbours and an APA route are not verified in our registry for the Saudi regime and should not be assumed

Our registry seeds the documentation standard’s effective date from 2019 — the bylaws have been re-issued since, and the updated set applies from the 2024 period — while the ministerial-resolution references stay not verified. The bylaws’ current text governs over anything summarised here.

The documentation obligation

The architecture is the OECD Chapter V one; the mechanics are Saudi:

• The tiers — the local file for the related-party transactions above the bylaws’ transaction threshold, the master file for the qualifying groups above a group-revenue test in SAR, and the CbCR with its notification. The SAR amounts are not verified in our registry — the practitioner’s working figures should be checked against the current bylaws before the calendar is set.
• The filing, not the holding — our registry’s rule is that the TP documentation and the prescribed related-party disclosures go to ZATCA with the annual tax return, alongside the bylaws’ own period for preparing the file after the year end (the periods not verified). That is a stricter posture than the European produce-on-request standard: the schedules are filed as compliance, and the file is then produced on request.
• Arabic, and signed — the documentation is prepared in Arabic, with the bylaws’ signature requirements attaching. This is the practical headline for an Indian group: the benchmarking work can be done in English, the file that is filed cannot be, and the translation and signing step has to sit inside the deadline rather than after it.
• The per-return schedules — beyond the tiers, the related-party disclosures that travel with the return are what ZATCA reads first: the volumes, the counterparties, the margins, before the file is opened.

The retention period is not verified in our registry; the seven-year Japanese and six-year Irish standards are the reference points, not assumptions.

The examination and the penalty landscape

• The selection — ZATCA administers the bylaws through a transfer-pricing risk-rating programme applied to the filed disclosures (the methodology is not verified in our registry); the audit risk is recorded as higher for the cross-border transactions.
• The examination — the standard questions, with the added weight on the file’s form: the Arabic presentation, the signature, the tiers present. A technically sound benchmarking study delivered in the wrong language or the wrong format is a documentation failure, and the matrix defence is only reached if the file is admissible.
• The penalties — documentation failures and misstatements attract the administrative fines in ZATCA’s implementing regulations and the general penalty regime, and non-arm’s-length pricing exposes the taxpayer to additional tax. The amounts are not verified for this engine — the percentages circulated in market summaries should be treated as unconfirmed until the current text and the local practitioner agree.
• The correlative — MAP under the applicable treaty, the Indian MAP route on the 90+ network, prepared with the documentation.

The context, not the rule: the 15% VAT and the 2.5% zakat base sit behind the Saudi tax picture, and the zakat-versus-income-tax duality of the taxpayer population changes what an adjustment actually costs. Which basis an entity is on is a classification question for the local practitioner — our registry addresses the income-tax arm’s-length rule only.

The India reading

The Saudi corridor is the energy, construction and services corridor: the EPC and contracting entities, the project companies, the operating and maintenance services, the staffing flows — and, under the Vision-2030 setup wave, the regional headquarters and trading entities Indian groups have been standing up in the Kingdom (the qualifying-conditions reading of those programmes is the local practitioner’s, and it interacts with the substance the TP file asserts). Three points for the Indian file:

1. Same economics, two files — and now a domestic limb. Saudi’s scope covers the domestic related-party transactions as well, so the Saudi-to-Saudi arrangements inside a Kingdom structure carry a TP file India’s cross-border framing would not anticipate.
2. The form is the first defence. The Indian Rule 10D file is examined on its substance; the Saudi file is examined on its compliance shape first — Arabic, signed, filed with the return. Build both presentations from one documentation set.
3. Treaty and establishment questions travel together. Where the Indian entity’s people operate from the Kingdom, the permanent-establishment reading arrives with the pricing question, not after it.

The working position for the group with a Saudi node

1. Confirm the bylaws’ current text first — the thresholds, the preparation periods and the instrument references are the three items our registry does not verify; the local practitioner confirms each.
2. Put Arabic and signature into the calendar — the translation is on the critical path to the with-return filing, not a post-year-end task.
3. Document the domestic flows — the Kingdom-to-Kingdom related-party transactions, the cost allocations and the management charges, on the same OECD method discipline.
4. Keep the group on one framework — the TP policy reconciling the Saudi, UAE and Indian files on one set of economics, with MAP as the correlative route if the two returns diverge.

See also

• Jurisdiction comparison — the documentation thresholds and deadlines
• UAE TP overview — the neighbour’s newer regime
• India TP overview — the contrast
• MAP and India’s DTAs — the correlative route