The latest update is the Transfer Pricing Regulations will affect “All Entities” subject to Zakat. Hence, effective January 1, 2024, ZATCA has expanded the transfer pricing compliance requirements to include All Zakat Payers.
Key Compliance Requirements:
1. Transfer Pricing Disclosure Form and Affidavit:
- All Zakat payers who engage in transactions with “Related Parties” are required to submit a Transfer Pricing Disclosure Form and an affidavit from a chartered accountant along with their Zakat returns, regardless of the total value of these transactions.
2. Transfer Pricing Documentation
Local File and Master File preparation needed:
2.1 Phase 1 (FY 2024 – FY 2026):
- Transactions ≤ SAR 48 million: Not required to prepare Local File and Master File.
- Transactions between SAR 48 million and SAR 100 million: Optional to prepare.
- Transactions > SAR 100 million: Mandatory preparation and maintenance of both files.
2.2 Phase 2 (FY 2027 onward):
- Transactions ≤ SAR 48 million: Not required to prepare Local File and Master File.
- Transactions > SAR 48 million: Mandatory preparation and maintenance of both files.
3. Transfer Pricing Policy and Supporting Documentation:
Zakat payers must maintain the following transfer pricing documentation:
- Group’s Transfer Pricing Policy;
- Evidence of arm’s length transactions; and
- Country Report (if subject).
This underscores the importance of demonstrating that all related-party transactions are conducted on an arm’s length basis, ensuring compliance with ZATCA’s transfer pricing requirements.
Next Steps:
- Immediate Action Needed: We recommend that finance departments familiarize themselves with these new requirements, review their transfer pricing policies and get in touch with us for any information. Initiate working on TP Disclosure Form as soon as possible, as the process may take time and efforts.
- Data Consistency: It’s important to ensure that all transaction details with related parties are mutually verified to maintain consistency and accuracy.
- Collaboration: We would be glad in maintaining close communication (GT Team / Us or with Your tax advisor) to ensure timely and accurate compliance.
How We Can Help:
Grant Thornton’s Saudi Arabia Team will support you in developing effective transfer pricing policies, and in preparing and submitting the required disclosure forms and affidavits to ZATCA.
Timely action will help in ensuring compliance with ZATCA’s directives and avoid any potential penalties.
If you need any help or have questions, please feel free to reach out to me directly at adaglas@sa.gt.com.
