Mubasher: The transfer pricing policies set by multinational corporates or foreign companies planning to establish a business in Saudi Arabia should come in line with the Transfer Pricing Bylaws, which have been recently announced by the kingdom, KPMG Al Fozan & Partners said.
Meanwhile, the existing foreign businesses in Saudi Arabia must be in line with the reporting obligations towards the General Authority of Zakat and Tax (GAZT); this should be implemented despite the tight deadlines, according to KPMG.
Head of Tax at KPMG Al Fozan & Partners Wadih Abu Nasr said, "Transfer Pricing is a global phenomenon with more than 100 countries in the world have (more or less complex) TP regulations embedded in their local tax law. Global investors and multinational companies are usually well aware of it and have established a Transfer Pricing policy that they apply on their related party transactions.”
Transfer Pricing regulations in Saudi Arabia are not only a compliance exercise as the GAZT will use the provided information to select which companies to audit and conduct more detailed audits on the ground, Wadih Abu Nasr added.
He further clarified that "Companies need to verify if any of their transactions will fall into this definition and becomes reportable. If the company has significant business relations with related parties (inside or outside the Kingdom), their Transfer Pricing exposure obviously rises.”
KPMG believes that the timing of the new regulations and tight deadlines are considered a challenge for all concerned businesses.
KPMG’s head of tax elaborated, "From a GAZT perspective, it still needs to be seen how the collected information will be used. For the country-by-country reporting 'CbCr' (the deadline is December 31, 2019) GAZT still needs to create the proper infrastructure to collect and share the information with the global community.”
On 15 February 2019, the Saudi GAZT published the Transfer Pricing By-Laws. KPMG Al Fozan said that a specific penalty regime for Transfer Pricing was not introduced by the GAZT.
“Transfer Pricing refers to the pricing of transactions between related Persons. These controlled transactions include but are not limited to transactions related to goods, services, loans and Intangibles,” according to KPMG Al Fozan.
Saudi Arabia’s Transfer Pricing provisions shall apply to taxpayers under the ‘Income Tax Law’ for the fiscal year ended on 31 December 2018. For the first year, due dates for filing the income tax return, disclosure form, and country-by-country reporting (CbCr) notification (if required) would be on 31 April 30 2019, and for filing the CbCr report (if needed) would be on 31 December 2019, KPMG clarified.