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September 16, 2022

Saudi Arabia issues results and decisions following comments received on public consultation to modify Transfer Pricing Bylaws

  • Saudi Arabia has issued its results and decisions relating to public comments received on the proposed amendments to the Transfer Pricing (TP) Bylaws.

  • Saudi Arabia’s Zakat, Tax and Customs Authority (ZATCA) partially agrees with some of the comments made through public consultation and will take these into consideration.

  • Zakat-paying groups should monitor the proposed changes to the TP Bylaws and review their process for documenting intercompany transactions and their overall TP policies.

Executive summary

On 4 July 2022, the ZATCA issued a public consultation document proposing to amend the TP Bylaws (amendments to TP Bylaws to be applied to zakat payers). The public was invited to provide their comments by 30 July 2022. The ZATCA has now issued its results and decisions relating to the public comments received on the public consultation platform. This can be viewed on

Detailed discussion


On 15 February 2019, the ZATCA (formerly General Authority of Zakat and Tax) issued the final TP Bylaws after a public consultation process that started on 10 December 2018. The ZATCA subsequently published TP guidelines (including updates of such guidelines — with the most recent update as of November 2021) as well as Frequently Asked Questions for the explanation of the provisions in the TP Bylaws. The current version of the TP Bylaws exempts 100% zakat payers from TP documentation provisions (TP master file, TP local file, and TP disclosure forms and affidavits), and only 100% income tax paying entities and mixed entities (paying both zakat and income tax) are subject to TP documentation requirements. It is important to note that qualifying zakat payers should comply with Country-by-Country Reporting (CbCR) requirements under the current TP laws.

In general terms, the arm’s-length principle was embedded as part of the new zakat regulations published on 14 March 2019. Zakat entities under these provisions are expected to establish related parties’ transactions under the arm’s-length principle.

Proposed changes

Through the public consultation document issued on 4 July 2022, the ZATCA has proposed to bring 100% zakat payers under the scope of the TP documentation process, like the current requirements for taxpayers and mixed entities. The proposed changes mostly relate to substitution of the word “taxpayers” with “zakat payers and taxpayers.” Other proposed changes relate to either the practical implementation of bringing zakat payers under the ambit of the TP Bylaws or minor adjustments in already existing definitions.

Public consultation results

Pursuant to the results issued by the ZATCA, below is a summary of issues raised in the public comments to which ZATCA has partially agreed and will take into consideration.

  • Clarification on whether transactions between resident related parties (100% Saudi owned entities) would also be subject to TP documentation and reporting requirements as this may significantly increase the scope of applicability.

  • Guidance applicability of TP reporting requirements on consolidated zakat returns.

  • Clarification on whether balance sheet items also need to be reported within the TP Disclosure Form.

  • Clarification on whether the same threshold (of SAR6m) for maintaining TP Documentation would apply for zakat payers.

  • Applicability of TP Affidavit and TP Disclosure Form for zakat payers.

  • Corresponding adjustments on related party transactions conducted within Saudi Arabia.

  • Clarification on advance pricing agreements, applicability date for compliance for zakat payers and guidance on how potential TP adjustments could be computed for zakat payers.

Further, the following is a summary of public comments to which ZATCA has disagreed with:

  • Clarification on mechanism for application of TP Bylaws on zakat payers whose Zakat is calculated on deemed profit basis.

  • Clarification on using internal comparables on transactions conducting with taxpayers when performing comparability analysis.


Zakat-paying groups need to monitor the proposed changes to the TP Bylaws and pay closer attention to documenting their intercompany transactions and their overall TP policies. These groups should be well-prepared for this change and be ready to comply with the proposed documentation requirements.


For additional information with respect to this Alert, please contact the following:

EY Consulting LLC, Dubai

Ernst & Young Professional Services (Professional LLC), Riyadh

Ernst & Young — Middle East, Manama

Ernst & Young LLP (United States), Middle East Tax Desk, New York


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