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The General Authority of Zakat and Tax (GAZT) have issued the transfer pricing bylaw, which introduces new transfer pricing compliance requirements for companies that are taxable in the KSA. The transfer pricing bylaw enables the KSA to bring its tax rules in line with international standards, provide GAZT additional tools to protect KSA’s tax base and prevent companies from using related party transactions to artificially shift profits from KSA to other countries with lower tax rates.
The key features of the KSA transfer pricing bylaw are as follows:
Given that the transfer pricing bylaw creates a number of compliance obligations for companies taxable in KSA and some of these obligations are required to be met before the submission of the tax return in April, companies must act immediately and assess the impact of the transfer pricing bylaw and take the necessary actions in order to be compliant.
Companies with financial years ending on 31 December 2018 should ensure that they submit the disclosure form and CbC report notification (if required) by 30 April 2019. The CbC report, where relevant, will be required by 31 December 2019. The master file and local file are also required to be prepared on an annual basis before the submission of the tax return and must be submitted to GAZT on request within 30 days from the date of GAZT’s request.
It is important for companies to understand their obligations under the transfer pricing bylaw, review their intercompany transactions to ensure that they are conducted on arm’s length terms and put in place transfer pricing documentation to support the pricing of such transactions.
As the largest law firm in the Middle East and with strong and dedicated tax expertise, Al Tamimi & Company is well placed to advise you on your transfer pricing obligations, assess your intercompany transactions from a transfer pricing perspective, conduct a comparability analysis and assist you with the preparation of transfer pricing documentation including master file, local file and a CbC report.
Please do not hesitate to contact Al Tamimi’s Tax Team if you require any assistance.