Economic Substance Requirements Saudi Arabia

Under OECD's Base Erosion and Profit Shifting (BEPS) framework — to which Saudi Arabia is a committed signatory — businesses must ensure that profits are taxed where genuine economic activities take place and where substantial value is created. This means Saudi entities that derive income from intellectual property, intragroup services, or financing arrangements must be able to demonstrate genuine economic substance in Saudi Arabia — not merely a registered address.

Intelli Solutions provides economic substance advisory for Saudi entities — assessing whether current operations meet the substance requirements implied by their transfer pricing positions, advising on practical steps to strengthen substance, and ensuring ZATCA documentation supports the positions taken in tax filings.

What Constitutes Economic Substance in Saudi Arabia

• Decision-making: Key management decisions are made by individuals physically present in Saudi Arabia (board meetings, strategic decisions, commercial agreements)
• Qualified employees: Sufficient qualified personnel in Saudi Arabia to conduct the core income-generating activity — not just administrative staff
• Operating expenditure: Adequate operating costs incurred in Saudi Arabia proportionate to the activity conducted
• Physical premises: Appropriate office space, equipment, or facilities for the declared activities
• Consistency with TP documentation: The actual operations must match the functional analysis described in the transfer pricing Local File