Executive summary

On 14 April 2026, Saudi Arabia and the United States (US) signed a Tax Information Exchange Agreement (TIEA, also referred to as "agreement" in this Alert) to facilitate the exchange of tax-related information relevant to the administration and enforcement of tax laws in both jurisdictions.

The TIEA aims to strengthen cooperation between the Saudi Arabia Ministry of Finance and the US Internal Revenue Service (IRS) by enabling the exchange of taxpayer information for compliance and enforcement purposes.

The TIEA enables the competent authorities of both countries to request and share information relevant to tax matters, including income tax, zakat, value-added tax (VAT), excise tax and other federal taxes. It establishes procedures for information exchange upon request and provides a framework that allows for automatic exchanges subject to separate mutual agreement between the competent authorities.

Detailed discussion

Background

Saudi Arabia and the US have previously committed to enhancing tax transparency and cooperation through various international frameworks, including the Foreign Account Tax Compliance Act (FATCA) and Country-by-Country Reporting (CbCR). The newly signed TIEA formalizes the exchange of tax information to support tax administration and enforcement. It complements Saudi Arabia's existing international tax-transparency commitments and enhances cooperation with the US tax authorities, aiming to combat tax evasion and improve compliance.

Highlights of the TIEA

Following are the key points under each Article (1 to 14) of the TIEA between Saudi Arabia and the US:

• Object and scope: Facilitates exchange of tax information relevant to administration and enforcement of tax laws in both countries, ensuring confidentiality and respecting legal safeguards
• Jurisdiction: Requires requested country to provide information held within its jurisdiction, regardless of the taxpayer's residency or nationality
• Taxes covered: Covers a broad range of taxes including income tax, zakat, VAT, excise tax, other similar taxes in Saudi Arabia, as well as federal income, employment, estate, gift and excise taxes in the US
• Definitions: Defines key terms such as Contracting State, competent authority, person, company and tax to clarify the agreement's application
• Exchange of information upon request: Outlines procedures for requesting and providing information, including scope, confidentiality and timelines for responses
• Automatic exchange of information: Allows for automatic exchange of information in categories mutually agreed upon by both countries
• Spontaneous exchange of information: Permits either country to spontaneously share information that may be relevant to tax enforcement without a prior request
• Possibility of declining a request: Lists valid grounds for declining information requests, such as protection of trade secrets, legal privilege or public policy concerns
• Confidentiality: Mandates strict confidentiality of exchanged information, limiting use to tax purposes and restricting further disclosure while permitting limited non-tax use in some instances such as counter-terrorism purposes, legal assistance in criminal matters, etc. with the prior written consent of the providing state and where allowed under domestic law
• Costs: Specifies that the country requested to provide the information shall bear the ordinary costs of providing assistance, while the requesting country shall bear the extraordinary costs, unless agreed otherwise
• Mutual agreement procedure: Provides a framework for resolving disputes or difficulties in interpreting or implementing the agreement through mutual consultation
• Mutual assistance procedure: Encourages cooperation in technical know-how exchange, audit techniques and joint studies to improve tax compliance
• Entry into force: Enters into force one month after Saudi Arabia completes its internal procedures; applies to information requests made on or after entry into force, relating to taxable periods beginning on or after 1 January of the third year preceding entry into force
• Termination: Allows either country to terminate the agreement with six months' notice, while maintaining confidentiality obligations for previously exchanged information

Implications

Businesses engaged in cross-border transactions between Saudi Arabia and the US should carefully review and update their tax documentation, payment classifications and transfer pricing policies to comply with the requirements of both jurisdictions. They should prepare for heightened monitoring by tax authorities and increased information exchange between the Ministry of Finance through the Zakat, Tax and Customs Authority (ZATCA) and the IRS, which could lead to more rigorous tax compliance and reporting obligations. Staying informed on evolving international tax transparency standards is essential to adapting to future regulatory changes and manage compliance risks.