An Advance Pricing Agreement (APA) is a formal understanding between a taxpayer and ZATCA that fixes, in advance, the transfer pricing method for specific related-party transactions. Saudi Arabia introduced APAs through Article 23 of the Transfer Pricing Bylaws, and ZATCA's first-edition APA Guidelines (February 2025) confirm that only unilateral APAs are available for now.
Key takeaways
- An APA locks in the transfer pricing method for covered related-party transactions before the years in question, giving certainty instead of arguing the point in a later audit.
- ZATCA is currently accepting only unilateral APAs (one taxpayer, one jurisdiction); bilateral and multilateral APAs are on hold until further notice.
- Each transaction in an APA must generally be worth at least SAR 100 million a year, though the Governor may exempt genuinely complex transactions from the threshold.
- Applications are filed through the ERAD portal at least 12 months before the first fiscal year the APA is meant to cover.
- A Saudi APA typically runs for three years, applies only to future transactions, and can be renewed for a further three years.
- The taxpayer must file an Annual Compliance Report (ACR) within 120 days of each year-end; missing it can lead ZATCA to cancel the APA.
What an APA is and why ZATCA introduced it
An APA lets a taxpayer and ZATCA agree the arm's length method for transactions with related persons, or between a head office and its permanent establishment (the taxable presence a foreign business has in the Kingdom), before those transactions happen. The mechanism was added by Article 23 of the Transfer Pricing Bylaws, introduced under Board Resolution No. [8-2-23] dated 28/08/1444H, corresponding to 20 March 2023. ZATCA's stated aim is to resolve transfer pricing questions up front and head off the drawn-out, costly audits that both sides would otherwise face.
Two features are worth understanding early. First, an APA is a discretionary service, not a right: taxpayers can apply, but ZATCA is not obliged to grant one. Second, the method fixed by the APA must be an approved transfer pricing method or another justifiable method that aligns with the arm's length principle. An APA covers a set number of zakat or tax years and sets the criteria (method, comparables and adjustments) in advance, taking account of the critical assumptions discussed below.
Only unilateral APAs, for now
ZATCA is introducing only unilateral APAs for now — one taxpayer, one jurisdiction — and will not process bilateral or multilateral APAs until further notice, because the regime is new in the Kingdom. Of the three kinds that exist in principle, a bilateral APA involves two jurisdictions and is concluded under the mutual agreement procedure of the relevant tax treaty, while a multilateral APA spans more than two jurisdictions.
A unilateral APA binds only ZATCA and the taxpayer. If the tax authority on the other side of a cross-border transaction disagrees and makes its own adjustment, ZATCA is not obliged to defend the APA, and the taxpayer carries the risk of double taxation. Weigh that risk before relying on a unilateral APA for two-sided international flows.
The unilateral-only limitation is the single most important planning point. For a purely domestic controlled transaction, a unilateral APA delivers clean certainty. For a cross-border flow, it removes the Saudi-side risk but leaves the foreign-side risk untouched, which is exactly what a bilateral APA would otherwise solve. Groups with significant two-sided flows should factor this into their international tax planning.
Who can apply, and the SAR 100 million threshold
Eligibility flows from Article 23 of the Bylaws. As a rule, each transaction covered by the APA must be worth at least SAR 100 million a year, although the Governor may exempt some complex transactions from that floor, and closely linked transactions can be aggregated to reach it. "Complex" here means transactions that are genuinely hard to price: where there is substantial doubt about which method applies, where the method itself is intricate (such as a profit split), or where reliable comparables are scarce and need significant adjustment. Two further limits apply: the taxpayer must start the process at least 12 months before the first fiscal year in the application, and ZATCA will not consider applications that include profit attribution to a permanent establishment.
How the process works
ZATCA runs the APA through five stages, from application to ongoing compliance. Unilateral applications are filed electronically through the ERAD portal (the Electronic Registration System); complex transactions exempted by the Governor go via the assigned relationship manager or the APA team instead. The indicative timeline below reflects the Guidelines.
| Stage | What happens | Indicative timing |
|---|---|---|
| Submission | File the application via ERAD, at least 12 months before the first covered year | Submission phase concluded in about 90 days |
| Introductory meeting | Discuss the covered transactions, proposed method and expected impact | Follows a complete application |
| Processing and evaluation | ZATCA reviews, analyses and negotiates the method | Evaluation targeted within about 9 months |
| Signing | Authorised representatives of both sides sign the unilateral APA | On agreement |
| Annual Compliance Report | The taxpayer reports each year to show it is meeting the terms | Within 120 days of each year-end |
Missing the 12-month lead time is fatal to the application: an incomplete filing by that deadline is rejected automatically through the portal, and the taxpayer then has to move the effective start year. During processing, ZATCA may limit or expand the proposed scope, or reject the request outright.
The APA period and staying compliant
Under Article 23(2)(c), a Saudi APA typically runs for three years and is binding on both ZATCA and the taxpayer, contingent on the taxpayer submitting its Annual Compliance Report. It applies only to future transactions and cannot be backdated, and it can be renewed for a further three years by mutual agreement. Throughout the term, the APA rests on critical assumptions about the taxpayer, related persons, the industry and economic conditions; if any of these change significantly, or if a change materially affects the suitability of the chosen method, the taxpayer must notify ZATCA and the APA may be revised or cancelled. The ACR is due within 120 days of each year-end alongside the tax or zakat return, and failure to file it can itself cause cancellation. This is where disciplined transfer pricing governance pays off, and where preparing for a possible audit or dispute remains sensible even with an APA in place. In practice, SBC advisers diarise the 120-day Annual Compliance Report the moment an APA is signed, because a single missed report can undo three years of certainty.
Frequently asked questions
What is an Advance Pricing Agreement in Saudi Arabia?
An Advance Pricing Agreement in Saudi Arabia is an agreement in which a taxpayer and ZATCA fix, in advance, the transfer pricing method for specified related-party transactions over a set number of years. Introduced under Article 23 of the Transfer Pricing Bylaws, it is a discretionary service designed to give tax certainty and avoid disputes.
Does ZATCA offer bilateral APAs?
Not yet. Because the regime is new, ZATCA is introducing only unilateral APAs and will not process bilateral or multilateral APAs until further notice. A unilateral APA gives Saudi-side certainty but leaves any foreign-side double-taxation risk with the taxpayer.
What is the minimum transaction size for a ZATCA APA?
SAR 100 million a year is the general minimum: each covered transaction must reach it, though the Governor may exempt genuinely complex transactions, and closely linked transactions can be aggregated to meet the threshold.
How long does a Saudi APA last?
A Saudi APA typically runs for three years, applies only to future transactions, and can be renewed for a further three years by mutual agreement. It remains contingent on the taxpayer filing an Annual Compliance Report within 120 days of each year-end.
When should a taxpayer apply for an APA in Saudi Arabia?
The application must start at least 12 months before the beginning of the first fiscal year it is meant to cover. Missing that lead time causes automatic rejection through the ERAD portal and forces the effective start year to move.
How SBC Tax Consulting can help
SBC guides Saudi taxpayers through the full APA journey: testing eligibility against the SAR 100 million threshold, framing the covered transactions and method, preparing the ERAD application and the introductory meeting, and managing the annual compliance reporting that keeps the agreement alive. We align the strategy with your wider transfer pricing and international tax position. To explore whether an APA fits your group, contact our team.
This publication is for general information only and does not constitute professional advice. Please consult your SBC advisor before acting on any matter covered here.