The Jeddah Chapter of Institute of Chartered Accountants of India (JCICAI) conducted a technical session on the recently issued Transfer Pricing Regulations. The session was attended by more than 50 members from the Indian accounting fraternity. Ms. Lubna Khatri from KPMG Al Fozan & Partners and Nabeel Kazi from Elaf Group were speakers for this informative and enterprising session. In February 2019, General Authority of Zakat and Tax (GAZT) released Transfer Pricing Bylaws that are applicable to companies who are subject to tax, either fully or partially in Saudi Arabia. In common parlance, Transfer Price is the price at which transaction between two related parties takes place. When Transfer Pricing is used by companies to artificially shift profit out of a country, it leads to loss of significant tax revenues for the country. The Transfer Pricing Bylaws aim to curb such practices by companies who park their profits in low tax jurisdiction or loss making companies. While the bylaws are applicable for the year ended 2018, anti-tax avoidance procedures were always embedded in the Saudi tax law. Being a part of Group 20 Nations, in September 2018, Saudi Arabia signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting. Saudi Arabia, being the only Gulf country to be part of G20 Nations, will host the 15th Annual Summit of G20 leaders in November 2020. The Bylaws require companies subject to tax in Saudi Arabia to provide disclosure of transaction between related parties in their annual tax declaration. Further, subject to fulfillment of prescribed monetary threshold, companies are required to prepare and maintain Local File for their operations in Kingdom and Master File for their operations globally. All multinational companies are required to comply with Country-by-Country Reporting requirements provided their annual consolidated group revenue exceeds SR3.2 billion. The said documentation requirements are broadly in line with Organization for Economic Cooperation and Development Action 13 on Transfer Pricing Documentation and Country-by-Country Reporting. Transfer Pricing is center of attention for revenue authorities around the globe which at times leads to protracted litigation. Various countries have provision for Advance Pricing Agreement (APA) in their tax law which allows the taxpayer and revenue authorities to enter into a binding agreement for a certain period relating to taxpayer's transfer prices to avoid future disputes. One needs to wait and watch how Transfer Pricing Bylaws will be implemented in practice and GAZT's role in managing litigation. — SG
