New Saudi APA Guidelines Signal Move To Promote Tax Certainty

Saudi Arabia’s tax authority, ZATCA, has taken a major step toward aligning with global transfer pricing standards with its first advance pricing agreement guidelines. Coming two years after APAs were introduced under the updated transfer pricing bylaws, this guidance marks a turning point for multinational enterprises doing business in the kingdom.

Saudi Arabia’s APA program is still in its early stages, but its launch sends a strong signal about the country’s commitment to a more predictable and investor-friendly tax environment. For multinational enterprises with significant operations or high-risk transactions in Saudi Arabia, engaging with ZATCA through the APA process can offer clarity and protection in an increasingly complex regulatory landscape.

For companies with high-value or complex intercompany transactions, the new APA framework offers a path to greater tax certainty and reduced audit exposure. But entering into an APA in Saudi Arabia will require thoughtful planning, internal alignment, and a firm grasp of the practical and strategic implications.

Tax authorities throughout the world are increasing their scrutiny of transfer pricing, and ZATCA is no exception. Its growing focus on enforcement makes proactive compliance measures all the more critical. The APA program—although currently limited to unilateral agreements—signals the authority’s willingness to engage constructively with taxpayers and provide upfront clarity on how related party transactions should be priced.

For multinational enterprises operating in or with Saudi Arabia, the new guidelines come at a time when navigating cross-border tax risk is more complex than ever, and a well-negotiated APA can offer a degree of certainty and protection against potential disputes that standard documentation alone may not achieve.

Saudi Arabia’s APA regime is best suited to multinational enterprises with material or complex related party transactions. To qualify, transactions must generally meet an annual threshold of 100 million Saudi riyals ($26.6 million). However, transactions below this amount still may be considered if they involve significant complexity—such as profit-split methods, unique intangibles, or difficult comparability issues.

Companies contemplating an APA also must assess their own stability. ZATCA places significant weight on “critical assumptions,” such as the taxpayer’s business model, risk profile, and financial performance. Any anticipated changes such as a corporate restructuring or market shift should be carefully evaluated, as they could affect the validity of the agreement once it’s in place.

Proactive, Structured Approach

For multinationals that meet the threshold and are comfortable with the assumptions required, preparation is key. The APA process in Saudi Arabia is thorough and collaborative, but it also requires transparency and proactivity from the taxpayer. The following steps can serve as a strategic roadmap:

Start with internal readiness. Before initiating discussions with ZATCA, multinationals should conduct an internal feasibility review. This includes gathering data on the relevant transactions, assessing current transfer pricing documentation, and identifying any gaps or inconsistencies that might arise during negotiations.

Use the pre-filing meeting strategically. ZATCA offers an optional pre-filing meeting. This is more than a formality—it’s a chance to test the waters, clarify the authority’s expectations, evaluate whether the transaction is suitable for the APA process and set the tone for a constructive engagement. This can also help avoid surprises during formal negotiations.

Build a strong application. The formal APA request must include detailed information on the covered transactions (functional and economic analyses), a defensible transfer pricing method, a benchmarking analysis, and justifications for any comparability adjustments. If the company proposes a non-standard method, it should explain clearly why this best reflects arm’s-length outcomes. Demonstrating a clear, arm’s-length basis from the outset will increase the chances of a successful negotiation.

Maintain open dialogue. The guidelines highlight that the process is interactive and may involve several rounds of discussions. ZATCA expects responsiveness, cooperation, and transparency throughout. Delays or unresponsiveness can jeopardize the application. Companies should therefore allocate the right resources to manage timelines and maintain consistent communication.

Know the limits. While the new program is a welcome development, there are important limitations. Currently, only unilateral APAs are available. This means the agreement binds only ZATCA, not the tax authority in the counterparty jurisdiction. Without a corresponding agreement abroad, multinationals still face the risk of double taxation if positions aren’t aligned.

Additionally, APAs in Saudi Arabia apply prospectively only—rollback to previous years isn’t allowed. The initial term is three years, with the option to renew for another three years. Compared to programs in other jurisdictions, this relatively short term underscores the importance of continuous compliance monitoring even after an APA is secured.

Next Steps

ZATCA’s APA guidelines reflect a broader trend in the Gulf toward greater transparency and alignment with Organization for Economic Cooperation and Development principles. As the program matures, the introduction of bilateral and multilateral APAs is expected, potentially giving multinationals more robust cross-border protection.

In the meantime, multinational enterprises should view the current APA option not as a quick fix, but as one tool in a broader transfer pricing strategy. For the right companies, APAs can bring real benefits: fewer disputes, more certainty, and a stronger relationship with the tax authority.

But success depends on preparation, clarity, and a long-term view. In a tax environment that’s evolving quickly, the companies that move early—and strategically—are those best positioned to benefit.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Ton van Doremalen is partner and head of tax, Middle East, with DLA Piper, based in the Dubai office.

Raneem Alrakhaimi is a tax manager with DLA Piper, based in the Riyadh office.

Juan Pablo Osman Moreno is principal/knowledge lead, transfer pricing, with DLA Piper based in the London office.

Randall Fox contributed to this article.

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