Including Zakat payers in Transfer pricing regulations
The Board of Directors of the Zakat, Tax and Customs Authority (ZATCA) approved amendments to Transfer Pricing (TP) Bylaws issued pursuant to Ministerial Resolution No. (6-1-19) Zakat payers will be included in the scope of covered entities.
The amendments apply to the financial years starting on or after 1 January 2024. Starting this date, Zakat payers will need to ensure that their transactions meet the arm’s length principle.
“Arm’s length” principle: In the event that transactions take place between two or more unrelated and unaffiliated parties acting as independent entities with independent commercial and financial transactions, profits are calculated following this principle.
“Arm’s length” principle states that the price agreed and charged in a transaction between two related parties must be the same as that in a comparable transaction controlled between two unrelated parties.
The new amendments to Transfer Pricing will be applied for Zakat payers following two phases:
Phase 1
| ≥ SAR100 million | > SAR48 million a | ≤ SAR48 million | The value of controlled transactions |
| Mandatory | Optional | Not applicable | TP documentation |
During this phase, all taxpayers subject to zakat collection are included, excluding investment funds.
Phase 2
| > SAR48 million | ≤ SAR48 million | Value of controlled transactions |
| Mandatory | Not applicable | TP documentation |
Investment funds will not be exempted during this phase.
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Osama IsmaelTax & Zakat Manager