Saudi Arabia’s New Advance Pricing Agreement Guidelines: Key Insights for Taxpayers

In February 2025, the Saudi Tax Authority (ZATCA) issued new Advance Pricing Agreements (APA) Guidelines, providing much-needed clarity on the APA process in Saudi Arabia. APAs were formally introduced in March 2023 as part of the latest update to the Saudi Transfer Pricing Bylaws, allowing both taxpayers and zakat-payers (collectively referred to as "Taxpayers")¹, to apply for APAs for financial years starting on or after 1 January 2024.

APAs are agreements between taxpayers and tax administrations that establish the transfer pricing (TP) methodology for related party transactions over a defined period of time. The primary objective of an APA is to provide certainty to taxpayers, minimize transfer pricing risk and reduce disputes with tax authorities.

Currently, Saudi Arabia only offers unilateral APAs, which are binding solely on ZATCA. Bilateral and multilateral APAs, which involve agreements between two or more tax authorities, are not yet available to Taxpayers but are expected to be introduced in the future.

This article outlines the eligibility criteria, process, and key considerations for Taxpayers looking to secure an APA with the Saudi Tax Authority.

 

Overview of the APA regime in Saudi Arabia

Under the new guidelines, Taxpayers can apply to ZATCA for a unilateral APA covering their related party transactions. For Saudi TP purposes, related parties include entities that are:

• Linked by capital ownership (typically a 50% or greater direct or indirect ownership); or
• Under common control through governance, business, or financial arrangements.

The scope of an APA is determined mutually between the Taxpayers and ZATCA. A typical APA includes:

• Details of the covered transactions and related parties;
• The TP methodology;
• An appropriate set of comparables, including any necessary adjustments; and
• Critical assumptions that must be met for the agreement to remain valid.

The APA period is generally three years, with the possibility of a three-year renewal, subject to ZATCA's approval. However, retroactive application (rollback) is not permitted under the current regime.

 

Eligibility criteria

To qualify for an APA, Taxpayers must meet the following conditions:

1. The transaction(s) covered must have an annual value of at least SAR 100 million (approximately USD26.6 million). Closely related transactions may be aggregated to meet this threshold.

2. Transactions below the materiality threshold may still qualify if they are considered complex. This is assessed on a case-by-case basis and examples of complex transactions include:

• Transactions requiring a profit-split analysis;
• Cases with uncertainty regarding the appropriate TP methodology; and
• Transactions requiring significant adjustments to comparables.

3. Taxpayers must submit a complete APA application to the Saudi Tax Authority at least 12 months before the start of the financial year they wish to be covered under an APA.

 

The APA process: What can Taxpayers expect

When applying for an APA, Taxpayers must complete and submit an application form that includes:

• Background information on the covered transaction(s);
• Financial and operational details of the Taxpayer and their Multinational Enterprise Group;
• Supporting documentation, including TP analyses.

Before submitting an APA request, Taxpayers also have the option to request a pre-filing meeting with ZATCA to discuss their eligibility and address any preliminary concerns.

Once the formal application is submitted, ZATCA will typically:

• Invite the Taxpayer to an introductory meeting;
• Review the application; and
• Issue a decision on whether to proceed with the APA negotiations, generally within three months of receiving a complete application.

The APA process generally involves multiple rounds of discussions between the Taxpayer and ZATCA. Throughout this process, Taxpayers are expected to be cooperative and responsive. Failure to engage actively or causing unreasonable delays may result in ZATCA rejecting the APA request at any stage.

Our team is equipped to provide tailored guidance on APA strategies to help your organisation mitigate risks, enhance certainty, and ensure compliance. For more information, please contact us directly.

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¹ Saudi Arabia has a dual fiscal regime under which corporations are subject to income tax or zakat, depending on the nationality and residence of their shareholders. Zakat applies to income, equity or both at different rates from income tax.