Middle East – Transfer Pricing Tightens: What Multinationals Must Know in 2025

DUBAI – Transfer Pricing Tightens Across the Middle East: What Multinationals Must Know in 2025

Transfer pricing (TP) is no longer a fringe issue in the Middle East. With a wave of new regulations, rising audit activity, and a shift toward global tax alignment, countries across the region are enforcing TP rules more aggressively than ever before. Multinational enterprises (MNEs) operating in Saudi Arabia, UAE, Egypt, Qatar, and Jordan. must quickly adapt or risk penalties, reputational damage, or the loss of tax incentives.

A New Era for TP Compliance in the Middle East

Driven by the global BEPS agenda and the need to diversify revenue beyond oil, governments in the Middle East are not only rolling out corporate tax systems but also embedding OECD-aligned transfer pricing regulations into domestic law.

Key Markets Implementing OECD’s TP Pillars:

Important Local Nuances:

• Localized Benchmarking: Egypt and Saudi Arabia require strict filters (e.g., removing loss-makers) and local or regional comparables.
• TP Certification: Saudi Arabia and Jordan require a third-party auditor-certified TP affidavit with returns.
• Strict Documentation Windows: In Saudi Arabia, documentation must be submitted within 30 days of request.

Key Developments Shaping TP in 2025

1. Saudi Arabia’s APA Program (Launched Jan 2024):

• Covers 3-year periods, unilateral only (bilateral expected soon).
• $25M threshold (exceptions for complexity).
• No concluded APAs yet, but ZATCA aims to finalize several by end of 2025.

2. Regional Headquarters (RHQs) in Saudi Arabia:

• Required for firms contracting with the government.
• Exempt from corporate tax if structured properly.
• RHQs must be audited annually and cannot engage in commercial activity.

3. Free Zones & SEZs:

• UAE and Saudi Arabia offer tax-exempt zones.
• TP support must demonstrate no artificial profit shifting.

4. Pillar Two Implementation Signals:

• Qatar: Amended income tax law to include minimum tax foundation.
• Bahrain: Introduced Domestic Minimum Top-Up Tax.
• UAE: Preparing for 2025 launch with new definitions in Federal Corporate Law.
• Kuwait: Joined OECD Inclusive Framework.

Companies must evaluate how TP interacts with minimum tax obligations under Pillar Two.

Increasing TP Audit Activity

Countries with established TP regimes—especially Saudi Arabia and Egypt—are intensifying audit scrutiny.

Top TP Audit Triggers in the Middle East:

• Consistent Losses with high outbound payments
• Fly-in / Fly-out operating models raising PE concerns
• True-Down Adjustments that reduce local profit
• Missing Documentation at time of audit (especially in Saudi Arabia)

According to regional tax advisors, ZATCA (Saudi Arabia) and Egyptian Tax Authority are applying rigorous audits with tight documentation timelines, leaving little flexibility for post-hoc corrections.

What Multinationals Should Do Now

To remain compliant and mitigate risk:

• Review and localize TP documentation across jurisdictions
• Implement robust TP policies supported by local economic substance
• Prepare for Pillar Two interaction with TP outcomes
• Engage early with tax advisors for APA or RHQ structuring
• Audit-proof your TP models with real-time benchmarking and disclosure forms

Final Takeaway

Transfer pricing in the Middle East is no longer optional—it’s mission-critical. With rising enforcement, evolving global norms, and region-specific requirements, tax leaders must act now. Companies that treat TP as a strategic function, not just a compliance box, will be best positioned to thrive.

For tailored strategies, multinationals should consult local tax experts and stay alert to emerging tax rules in each country.

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