Saudi family groups can no longer treat transfer pricing as a "foreign investor tax issue." Since financial years beginning on or after 1 January 2024, Zakat-paying entities have entered a new compliance era.
For CFOs, family office asset managers, and group financial controllers, this makes a transfer pricing course Saudi Arabia more than professional development. It is now a control requirement for related-party transactions, auditor sign-offs, and ZATCA documentation readiness.
ZATCA defines transfer pricing as the pricing of transactions between related persons or persons under common control, also known as controlled transactions. Its official transfer pricing page explains that the arm's length principle must be the basis for pricing transactions between related parties, as if those transactions were conducted between independent persons.
That principle now matters directly to 100% Zakat-paying Saudi groups.
The End of the Zakat Exemption
For years, many Saudi-owned groups assumed that transfer pricing was mainly a concern for income taxpayers, mixed entities, or multinational structures. That assumption is now dangerous.
ZATCA's amended transfer pricing framework extends key TP compliance obligations to Zakat payers for financial years beginning on or after 1 January 2024. EY's summary of the approved amendments notes that the TP Bylaws apply to both taxpayers and Zakat payers from that date, with specific requirements for Zakat payers to prepare Local File and Master File documentation depending on related-party transaction thresholds.
This change affects traditional Saudi structures such as the following:
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Family-owned holding companies.
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Real estate groups.
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Manufacturing groups.
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Trading subsidiaries.
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Service companies within a Saudi group.
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Treasury or financing vehicles.
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Shared service companies.
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Asset-owning entities that lease or lend to related parties.
The old belief was: "We are 100% Saudi-owned, so TP is not our main issue."
The new reality is: if there are controlled transactions, ZATCA may expect visibility, disclosure, and arm's length support.
What Counts as a Controlled Transaction?
A controlled transaction is not limited to cross-border trade. It can include domestic arrangements between related Saudi entities if the parties are related or under common control.
Common examples include:
| Transaction Type | Example |
|---|---|
| Management services | Parent charges subsidiaries for group administration |
| Intercompany loans | Holding company finances operating companies |
| Asset leasing | Related entity leases warehouses, offices, or equipment |
| Cost sharing | Group companies share IT, HR, or procurement costs |
| Product sales | Manufacturing company sells to related distributor |
| Intangibles | Related entity licenses brand, software, or know-how |
| Guarantees | Parent provides financing support to related entity |
| Recharges | One company pays costs and recharges group entities |
This is why Saudi groups should not wait for foreign ownership before reviewing transfer pricing.
The Phase 1 Threshold Framework
The Phase 1 framework gives Zakat payers some breathing space, but not a free pass.
For 100% Zakat-paying entities, the key documentation thresholds for Phase 1 generally apply during 2024–2026:
| Aggregate Related-Party Transactions | Phase 1 Treatment |
|---|---|
| SAR 48 million or below | Master File and Local File generally not applicable |
| More than SAR 48 million but below SAR 100 million | Documentation may be voluntary or recommended depending on risk |
| SAR 100 million or more | Master File and Local File mandatory |
| Any related-party activity | CTDF and licensed accountant affidavit may still be required |
Alvarez & Marsal's 2026 compliance reminder states that the Transfer Pricing Disclosure Form and affidavit from a licensed accountant are mandatory attachments for entities with related-party transactions, with no threshold, and that Master File and Local File thresholds are SAR 100 million for 100% Zakat entities during the current phase, reducing to SAR 48 million from FY2027.
This means the most important Phase 1 message is:
Master File and Local File may depend on thresholds, but disclosure discipline starts with any controlled transaction activity.
Controlled Transactions Disclosure Form CTDF
The Controlled Transactions Disclosure Form CTDF is not a minor formality.
ZATCA's transfer pricing guidelines explain that the disclosure form is used by the authority to conduct a high-level transfer pricing risk assessment. The form is part of the Zakat, or tax return, process and is generally submitted within 120 days after the fiscal year-end.
For Zakat groups, CTDF preparation should include:
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Identifying all related parties.
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Mapping transaction categories.
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Listing transaction values.
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Confirming pricing methods.
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Reviewing contracts and intercompany agreements.
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Checking whether the transactions are domestic or cross-border.
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Confirming whether CbCR notification applies for large groups.
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Coordinating with the external auditor for the affidavit.
The CTDF should not be prepared at the end of the return process from memory. It should be built from a live controlled transaction register.
The Auditor Arm's Length Affidavit
One of the most sensitive requirements is the auditor arm's length affidavit.
The CTDF must be supported by a formal affidavit from a licensed accountant, certifying that the group's transfer pricing policy has been consistently applied. This is a serious governance control because the auditor is not merely confirming that related-party transactions exist. The affidavit links the filing to the group's TP policy and its application.
Before asking the auditor to sign, the finance team should be able to provide:
| Evidence | Why It Matters |
|---|---|
| Related-party transaction register | Shows the full transaction population |
| Intercompany agreements | Supports legal basis for charges |
| Pricing policy | Explains how prices are set |
| Benchmarking or method selection file | Supports arm's length position |
| Invoices and ledger extracts | Confirms values reported |
| Management approvals | Shows internal governance |
| Reconciliation to Zakat return | Ensures filing consistency |
| Prior-year comparison | Detects unusual changes |
| Entity functional profile | Explains roles, risks, and assets |
If the auditor cannot trace the numbers, policy, and evidence, the affidavit process can become slow, expensive, or disputed.
Is a Local File Mandatory for Saudi Family Business Entities?
The answer depends on the aggregate value of controlled transactions and the applicable phase.
During Phase 1, a 100% Zakat-paying family business with related-party transactions below the mandatory threshold may not need to prepare a full Local File and Master File. However, that does not mean the group has no TP obligation.
At minimum, the group should maintain baseline support showing:
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Who the related parties are.
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What transactions occurred.
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Why the pricing is commercially reasonable.
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How the values were calculated.
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Whether the CTDF was required.
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Whether an auditor affidavit was obtained.
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Whether the transaction total approaches future thresholds.
This is what contemporaneous tax compliance means in practice. The file is built while the facts are fresh, not after ZATCA asks questions.
Preparing for the 2027 Phase 2 Drop
The most urgent strategic issue is the 2027 threshold drop.
From 1 January 2027, the Master File and Local File threshold for Zakat payers is expected to reduce to SAR 48 million. EY's summary of the amended rules describes the two-phase implementation, with Phase 1 beginning 1 January 2024 and Phase 2 beginning 1 January 2027, where documentation obligations expand based on the lower transaction threshold.
This matters because many Saudi groups may sit below SAR 100 million today but above SAR 48 million tomorrow.
Examples include:
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A holding company charging SAR 60 million in management fees.
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A property group with SAR 75 million in intercompany leases.
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A trading group with SAR 80 million in related-party purchases.
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A family office with recurring financing and cost-sharing flows.
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A logistics group with related-party service charges across entities.
These groups may not be mandatory Local File and Master File cases in Phase 1, but they are already future Phase 2 cases.
The 2024–2027 Readiness Roadmap
Saudi groups should start building their TP operating model now.
Step 1: Build a related-party map. Identify all entities under common ownership or control. Include direct ownership, indirect ownership, family control, board control, financing control, and operational dependency.
Step 2: Create a controlled transaction register. Track every related-party transaction by entity, counterparty, transaction type, value, currency, contract, pricing method, and ledger account.
Step 3: Segment domestic and cross-border flows. Do not exclude domestic transactions. Separate them for analysis, but keep them inside the controlled transaction register.
Step 4: Prepare CTDF support. Align CTDF data with the Zakat return, audited financial statements, trial balance, and intercompany reconciliations.
Step 5: Secure auditor evidence early. Give the licensed accountant the transaction register, policy file, agreements, and reconciliations before the return deadline rush.
Step 6: Assess Master File and Local File thresholds. Track whether aggregate controlled transactions are below SAR 48 million, between SAR 48 million and SAR 100 million, or above SAR 100 million.
Step 7: Prepare for 2027 now. If the group exceeds SAR 48 million, begin building Local File and Master File capability before Phase 2 applies.
Why Family Offices Are Exposed
Family offices often run complex internal arrangements without formal transfer pricing documentation.
They may hold investments, lend funds, employ staff, recharge professional fees, manage real estate, own trademarks, or centralize procurement. These arrangements are commercially normal, but they still need documentation.
Common weak points include:
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No written intercompany agreements.
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Informal management fee allocations.
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Interest-free or undocumented loans.
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Shared employees with no recharge model.
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Asset leases priced below market.
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Related-party balances left unreconciled.
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Same owner, multiple entities, no pricing policy.
ZATCA does not need a foreign party to ask whether the pricing is arm's length. Domestic Saudi structures can still create Zakat base effects and transfer pricing risk.
Where Training Fits
The course Transfer Pricing Compliance helps internal teams understand how to classify controlled transactions, prepare disclosure support, coordinate auditor affidavits, and plan Local File and Master File readiness before thresholds tighten.
For many Saudi groups, the training need is not academic. It is operational.
Your finance team must be able to answer:
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Which transactions are controlled?
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Which entity owns the risk?
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What method supports the price?
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Is there a contract?
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Is the transaction in the CTDF?
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Does the auditor have enough evidence?
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Are we approaching SAR 48 million or SAR 100 million?
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Can we respond within 30 days if ZATCA requests documentation?
That is exactly where a focused transfer pricing course in Saudi Arabia becomes valuable.
Conclusion
Treating Zakat entities as immune to transfer pricing scrutiny is now an immediate multi-million SAR exposure risk.
The rules have shifted. Zakat payers with related-party activity must understand the CTDF, auditor affidavit expectations, arm's length principle, Phase 1 thresholds, and the coming 2027 reduction to SAR 48 million.
The safest approach is to build the infrastructure now: related-party maps, controlled transaction registers, intercompany agreements, pricing policies, auditor-ready evidence, and documentation workflows.
Enrolling your accounting infrastructure in Transfer Pricing Compliance ensures your internal teams can secure necessary auditor sign-offs cleanly and prepare before ZATCA scrutiny becomes more intense.
