Transfer Pricing Rules UAE & KSA 2025 | Compliance & Advisory Services

 Transfer Pricing Rules UAE & KSA 2025 | Compliance & Advisory Services

The New Era of Tax Transparency

The business landscapes of the United Arab Emirates (UAE) and the Kingdom of Saudi Arabia (KSA) are rapidly evolving, with a strong emphasis on international tax compliance and transparency. At the heart of this evolution lies Transfer Pricing (TP)—the rules and methods for pricing transactions between associated enterprises in different tax jurisdictions.

For multinational companies operating in the UAE and KSA, understanding and complying with these regulations is no longer optional. With both nations implementing robust TP frameworks aligned with the OECD guidelines, non-compliance can lead to severe penalties, double taxation, and reputational damage.

This guide breaks down the essentials of transfer pricing for businesses in the Gulf region.

What is Transfer Pricing?

Transfer pricing refers to the prices charged for transactions between related parties, such as a parent company and its subsidiary, or between sister companies under common control. These transactions can include:

• Sale of goods
• Provision of services
• Use of intellectual property (licensing)
• Loans and financial transactions
• Cost-sharing arrangements

The core principle, known as the “Arm’s Length Principle,” mandates that these transactions must be priced as if they were conducted between independent, unrelated parties under similar circumstances.

Why is Transfer Pricing Critical for UAE and KSA Businesses?

The introduction of Corporate Income Tax (CIT) in the UAE and the strengthening of existing tax laws in KSA have made TP a top priority for two main reasons:

1. Preventing Base Erosion and Profit Shifting (BEPS): Governments use TP rules to ensure that profits are not artificially shifted out of their country to low-tax jurisdictions, protecting their tax base.
2. Ensuring Fair Taxation: TP regulations create a level playing field, ensuring that each country taxes its fair share of profits generated by multinational groups within its borders.

Key Transfer Pricing Requirements in the UAE and KSA

Both countries have established comprehensive TP regulations, closely mirroring OECD standards.

In the UAE:

• Arm’s Length Principle: Federal Tax Authority (FTA) requires all related-party transactions to adhere to the arm’s length principle.
• Documentation: Businesses must prepare and maintain a Master File, Local File, and a Summary Disclosure Form.
• Thresholds: Exemptions for smaller businesses exist, but strict conditions apply.
• Penalties: Significant fines are levied for non-compliance, failure to file, or inadequate documentation.

In the Kingdom of Saudi Arabia (KSA):

• ZATCA Enforcement: The Zakat, Tax and Customs Authority (ZATCA) has been actively enforcing TP rules for longer.
• Detailed Documentation: Requires a Master File, Local File, and Country-by-Country (CbC) Reporting for large multinational groups.
• Advanced Pricing Agreements (APAs): ZATCA allows businesses to enter into APAs for certainty on their TP methods for future transactions.
• Strict Penalties: KSA also imposes hefty penalties for non-compliance and adjustments.

The Consequences of Non-Compliance

Getting transfer pricing wrong is costly. Risks include:

• Tax Adjustments: The tax authority can adjust your profits, leading to a higher tax bill.
• Double Taxation: If two countries disagree on a TP valuation, the same profit could be taxed twice.
• Financial Penalties: Fines can reach hundreds of thousands of dirhams/riyals.
• Reputational Damage: Tax audits and disputes can harm your company’s reputation with regulators and partners.

How Ghalib Consulting Can Help You Achieve Compliance

At Ghalib Consulting, we provide end-to-end transfer pricing services to protect your business and ensure peace of mind. Our expertise includes:

• Transfer Pricing Risk Assessment: Evaluating your current related-party transactions.
• Benchmarking Studies: Using global databases to justify your pricing policies and prove arm’s length compliance.
• Documentation Preparation: Preparing robust Master Files and Local Files tailored to UAE and KSA requirements.
• Advisory & Planning: Developing sustainable TP policies aligned with your business model.
• Dispute Resolution & Support: Representing you in communications and audits with the FTA or ZATCA.

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Image: Our expert advisors help you navigate complex transfer pricing regulations with confidence.

Conclusion: Proactive Planning is Key

Transfer pricing is a complex but unavoidable aspect of doing business internationally in the Gulf region. With the regulatory environment tightening, a proactive approach is not just recommended—it is essential.

By implementing strong TP policies and maintaining impeccable documentation, you can mitigate risks, avoid penalties, and focus on what you do best: growing your business.

Don’t let transfer pricing uncertainties hold you back.

📞 Contact Ghalib Consulting Today for a Consultation:
📧 Email: ghalib@ghalibconsulting.com
📱 Phone: +966-50-7024644