Article 1 - Definitions

A. The following terms and expressions, wherever stated in these Bylaws, shall have the meanings set out herein:

1. “Approved Transfer Pricing Methods” means the methods enumerated in Article 7 of the Bylaws or used pursuant to Article 9 of the Bylaws.

2. “Arm’s Length Principle” or “Arm’s-Length” means where conditions are made or imposed between two or more Related Persons in their commercial or financial relations which differ from those which would be made between Independent Persons, then any profits which would, but for those conditions, have accrued to one of such Related Persons, but, by reasons of those conditions, have not so accrued, may be included in the profits of that Person and taxed accordingly.

3. The “Arm’s-Length Range” shall have the meaning given in Article 11 of the Bylaws.

4. “The Authority" means the General Authority of Zakat and Tax.

5. The “Bylaws” means these Transfer Pricing Bylaws issued by The Authority pursuant to Board Resolution No [6-1-19] dated 25/05/1440H corresponding to 31/01/2019.

6. “Comparable Transaction” means a Comparable Transaction as defined in Article 5 of the Bylaws.

7. “Constituent Entity of an MNE Group” means
(a) any separate business unit of a multinational enterprise group, that is included in the consolidated financial statements of the MNE Group for financial reporting purposes, or would be so included if equity interests in such business unit of an MNE Group were traded on a public securities exchange;
(b) any such business unit that is excluded from the MNE Group’s consolidated financial statements solely on materiality grounds; and
(c) any Permanent Establishment of any separate business unit of the MNE Group included in subparagraphs (a) or (b) above provided the business unit prepares or should prepare a separate financial statement of such Permanent Establishment for financial reporting, regulatory reporting, tax reporting, or internal management control purposes.

8. “Consolidated Financial Statements” means the financial statements of an MNE Group in which the assets, liabilities, income, expenses and cash flows of the Ultimate Parent Entity and the Constituent Entities are presented as those of a single economic entity.

9. “Controlled Transactions” means any Transaction involving Related Persons or Persons Under Common Control. Controlled Transactions shall include any notional Transactions or consideration exchanged between a Person and its Permanent Establishment, to the extent that such Transactions are recognized for the purposes of the Law.

10. “Country-by-Country Report” or “CbC Report” means a report required to be submitted pursuant to Article 18 of the Bylaws.

11. “Disclosure Form of Controlled Transactions” means the document or set of documents required by the Authority pursuant to Article 14 of the Bylaws.

12. “Effective Control” means the ability of a Person to control the business decisions of another Person. For purposes of these Bylaws, a Person or group of Persons, either jointly or severally, directly or indirectly, are presumed to be able to control the business decisions of another Person in any of the following cases –without limitations:
(a) such Person or Persons have the ability to conclude an agreement to provide management services to the company or otherwise effectively perform the functions of management for the other Person;
(b) such Person or Persons have the ability to act as trustee (manager) of the other Person or Persons under a trust arrangement;
(c) such Person or Persons have the ability to directly or indirectly control the composition of 50% or more of the board of directors or has/have the right to appoint or dismiss the representatives of management of the other Person or Persons;
(d) such Person or Persons have a legal or de facto right to receive, directly or indirectly, 50 percent (50%) or more of the profits of the other Person or Persons;
(e) such Person or Persons, except where such Person is a Financial Institution, have provided loans to the Person or Persons directly or indirectly and the total outstanding balance of such loans represents 50 percent (50%) or more of the of long term & short term debt and capital excluding retained earnings as of the year-end balance of the Reporting Year;
(f) such Person or Persons, with the exception of Financial Institutions, have issued guarantees to cover 25% or more of the value of the Person’s total borrowings as of the year-end balance of the Reporting Year;
(g) 50% or more of the absolute aggregated value of a Person’s business activities as of the year-end balance of the Reporting Year depends on Transactions with such other Person or Persons;
(h) such Person or Persons are Related Person to a Person who directly or indirectly holds fifty percent (50%) or more of a juridical person or they participate, directly or indirectly, in the management of the juridical person;
(i) a Person is or Related Persons, jointly or severally, are the principal or supplier of a Person under an exclusive agency, distributorship arrangement or any such similar contract for the sale of goods, services or rights and such Person is a dependent agent of the principal and who is prohibited from entering into other similar agency, distributorship arrangement or any such similar arrangement for the duration of the Person’s relationship with the principal;
(j) in the case of Nonresident Person or Related Persons, where a substantial portion of the business activities of a Resident Person depends on Transactions with the Nonresident Person or Related Persons, and the Resident Person’s business activities depend on rights in intangible property granted to such Person on an exclusive basis directly or indirectly by the Nonresident Person or Related Persons; or
(k) the Person is or Related Persons, jointly or severally, are able to control the business decisions of the other Person in any other way as evidenced by the facts and circumstances.

13. Financial Institution” means a juridical person, the substantial and primary business of which is to conduct banking, financing or both, and that is regulated by one or more central government agencies responsible for licensing and supervising it in jurisdictions in which it operates.

14. “Functional Analysis” means the analysis or study aimed at identifying the economically significant activities and responsibilities undertaken, assets used or contributed, and risks assumed by the parties to the Transactions.

15. The “Guidelines” means the document or set of documents issued by GAZT setting forth all information and details related to these Bylaws, including, without limitations, the interpretation, implementation, enforcement, and application thereof.

16. “Independent Persons” means Persons that are not Related Persons or Persons under Common Control.

17. “International Agreement” means the Multilateral Convention for Mutual Administrative Assistance in Tax Matters, any bilateral or multilateral tax convention, or any tax information exchange agreement to which the Kingdom is a party and pursuant to which jurisdictions commit to the mutual exchange of tax information, including automatic exchange of such information.

18. The “Law” means The Income Tax Law issued by Royal Decree No. (M/1) dated 15/1/1425H and the amendments thereon.

19. “Local File” means the file referred to in Article 17 of the Bylaws.

20. “Master File” means the file referred to in Article 16 of the Bylaws.

21. “Multinational Enterprise Group” or “MNE Group” means:
(a) a group of two or more Persons, the tax residencies of whom are in different jurisdictions; or
(b) any group that includes a Person that, for tax purposes, is a resident in one jurisdiction and is also subject to tax in another jurisdiction as a result of having a Permanent Establishment in the other jurisdiction.

22. “Person” means a natural or juridical person; where a juridical person is any non-natural person recognized by law or fact to have legal personality, including Permanent Establishments.

23. “Persons under Common Control” two or more juridical persons are deemed Persons under Common Control if either:
(a) the Person or Related Persons, either individually or jointly, control directly or indirectly fifty percent (50%) or more of such Persons where:
(i) with respect to Partnerships, control means the actual ownership, right to use and dispose of as an owner, or the ability to own with reasonable certainty the rights to its income or capital.
(ii) with respect to Capital Companies, control means actual ownership, right to use and dispose of as an owner, or the ability to own with reasonable certainty, the voting rights to its capital or its income.
(iii) with respect to agencies that administer properties endowed for specific purposes, control means having the rights to, or a beneficial interest in their income or assets; or
(b) the Person or Related Persons, either separately or jointly, directly or indirectly is or are able to control the business decisions of such juridical person or otherwise have Effective Control over such juridical person.

24. “Qualifying Competent Authority Agreement” means an agreement that is between authorized representatives of the jurisdictions that are parties to an International Agreement pursuant to which the jurisdictions are required to automatically exchange CbC Reports.

25. “Related Persons” means
(a) two or more natural persons if they are:
(i) relatives through marriage or are otherwise relatives to the fourth degree; or
(ii) partners in a partnership.
(b) a natural person is considered related to a juridical person in any of the following circumstances:
(i) if the natural person is a partner in a Partnership and he, either alone or together with a Related Person or Persons, directly, indirectly (or both) controls fifty percent (50%) or more of the voting rights, income, capital of the Partnership.
(ii) if the Person or a Related Person thereto is a shareholder in a Capital Company and he, either alone or together with a Related Person or Persons, directly, indirectly (or both) controls fifty percent (50%) or more of the voting rights, income or capital of the Capital Company.
(iii) as for agencies administering property held in a trust, fund or any such similar arrangement, a natural person is considered related thereto if he benefits or is capable of benefiting from them, either alone or with a related Person or Persons.
(iv) if the Person alone or jointly with a Related Person thereto directly or indirectly participates or is able to participate in the management, control or capital of a juridical person.
(c) two or more juridical persons are considered Related Persons in any of the following cases:
(i) they are Persons under Common Control.
(ii) when the Person who controls or has the ability to control the business decisions of a juridical person has, alone or together with a Related Person, Effective Control over the other juridical person.
(iii) when the Person who has Effective Control over a juridical person and the Person who has Effective Control of the other juridical person are Related Persons.

26. “Reporting Entity” means a Constituent Entity that is required to submit a Country-by-Country Report to the Authority or any other tax authority on behalf of a Multinational Enterprise Group.

27. “Reporting Year” means the reporting year as defined in the Law.

28. “Small Enterprises” means a juridical person who carries out Controlled Transactions, the total Arm’s-Length value of which does not exceed Six Million Saudi Riyals (SAR 6,000,000) in a 12-month period.

29. “Surrogate Parent Entity” means where the conditions set out in Article 18 of the Bylaws are met, the Constituent Entity of an MNE Group appointed by such MNE Group as the sole substitute for the Ultimate Parent Entity to file the CbC Report in that Constituent Entity’s jurisdiction of tax residence on behalf of such MNE Group.

30. “Systemic Failure” means the persistent failure of a jurisdiction that is a party to an enforceable Qualifying Competent Authority Agreement to which the Kingdom is a party, to automatically provide the Kingdom with CbC Reports available or could be made available to it in respect of MNE Groups that have Constituent Entities in the Kingdom, or jurisdictions in which automatic exchange is effectively suspended for reasons that are not in accordance with the terms of that Qualifying Competent Authority Agreement.

31. “Taxable Person” means a Person subject to tax as per the Law. For purposes of the Bylaws, whenever a Person who is not a Person Subject to tax is required to comply with the Bylaws or any part thereof, the term Taxable Person is be deemed to include such Person.

32. “Terms” “Economically Relevant” or “Economically Relevant Terms” means the characteristics, elements, factors, or any other aspect of a Transaction that Independent Parties would take into account when evaluating the Transaction.

33. “Transaction” means any arrangement, understanding, agreement, or mutual practice whether or not legally enforceable or intended to be legally enforceable, undertaken between two or more Persons.

34. “Transfer Pricing” means setting of prices for Controlled Transactions, including but not limited to the transfer of goods, services, loans, capital and intangibles (intellectual property).

35. “Transfer Pricing Method” means any of the transfer pricing methods set forth in Article 7 of the Bylaws.

36. “Uncontrolled Transaction” means any Transaction other than a Controlled Transaction.

37. “Ultimate Parent Entity of an MNE Group” means a Constituent Entity of an MNE Group that:
(a) owns directly or indirectly a sufficient interest in one or more other Constituent Entities of such MNE Group such that it is required to prepare consolidated financial statements under accounting principles generally applied in its country of tax residence, or would be so required if its equity interests were traded on public securities exchange in its country of tax residence; and
(b) there is no other Constituent Entity of such MNE Group that owns directly or indirectly an interest described in subsection (a) above.

B. All other terms not defined herein have the same meaning as defined in the Law and/or Implementing Regulations.