Introduction to Transfer Pricing
The General Authority of Zakat and Tax “GAZT” has issued Transfer Pricing Bylaws for Saudi Arabia which apply to all Taxable Persons in the Kingdom. These Bylaws set out a framework to set prices for Controlled Transactions, including but not limited to transfers of goods, services, loans and Intangibles (intellectual property).
Key points to note
The provisions will apply to resident capital companies, with respect to shares of Foreign (non-Saudi) partners. The provisions of Income Tax Law also apply to:
- A resident non-Saudi natural person who conducts business in the KSA.
- A non-resident who conducts business in Saudi Arabia through a permanent establishment.
- A non-resident with other taxable income from sources within the KSA.
- A Person engaged in the field of natural gas investment.
- A Person engaged in the field of oil and hydrocarbons production.
For Persons subject to Zakat may (in certain situations) only be applicable to such Persons insofar they are required to satisfy the CBCR obligations. The Bylaws set out a framework to set prices for Controlled Transactions, including but not limited to transfers of goods, services, loans and Intangibles.
The concept of Transfer Pricing is not new to the income tax practice of the Kingdom. However, the Bylaws introduced detailed provisions with respect to Transfer Pricing.