Peer Review Report Phase 2 Implementation of The Standard in Practice

GLOBAL FORUM ON TRANSPARENCY AND EXCHANGE
OF INFORMATION FOR TAX PURPOSES
Peer Review Report

Phase 2
Implementation of the Standard
in Practice
SAUDI ARABIA
Global Forum
on Transparency
and Exchange
of Information for Tax
Purposes Peer Reviews:
Saudi Arabia 2016
PHASE 2:
IMPLEMENTATION OF THE STANDARD IN PRACTICE
March 2016
(reflecting the legal and regulatory framework
as at December 2015)
This work is published on the responsibility of the Secretary-General of the OECD.

The opinions expressed and arguments employed herein do not necessarily reflect
the official views of the OECD or of the governments of its member countries or
those of the Global Forum on Transparency and Exchange of Information for Tax
Purposes.
This document and any map included herein are without prejudice to the status of
or sovereignty over any territory, to the delimitation of international frontiers and
boundaries and to the name of any territory, city or area.
Please cite this publication as:
OECD (2016), Global Forum on Transparency and Exchange of Information for Tax Purposes Peer
Reviews: Saudi Arabia 2016: Phase 2: Implementation of the Standard in Practice, OECD Publishing.
http://dx.doi.org/10.1787/9789264250895-en
ISBN 978-92-64-25088-8 (print)

ISBN 978-92-64-25089-5 (PDF)
Series: Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews
ISSN 2219-4681 (print)
ISSN 2219-469X (online)
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OECD 2016
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TABLE OF CONTENTS 3
Table of Contents
About the Global Forum 5

Executive summary 7
Introduction 13
Information and methodology used for the peer review of Saudi Arabia 13
Overview of Saudi Arabia14
Recent developments 19
Compliance with the Standards 21
A. Availability of information 21
Overview 21
A.1. Ownership and identity information 24
A.2. Accounting records 50
A.3. Banking information 60
B. Access to information 65
Overview 65
B.1. Competent Authoritys ability to obtain and provide information 67
B.2. Notification requirements and rights and safeguards 76
C. Exchanging information 79
Overview 79
C.1. Exchange-of-information mechanisms 81
C.2. Exchange of information mechanisms with all relevant partners 87
C.3. Confidentiality 88
C.4. Rights and safeguards of taxpayers and third parties 91
C.5. Timeliness of responses to requests for information 92
PEER REVIEW REPORT PHASE 2 SAUDI ARABIA OECD 2016
4 TABLE OF CONTENTS
Summary of determinations and factors underlyingrecommendations101
Annex1: Jurisdictions response to the review report 107
Annex2: List of all exchange-of-information mechanisms inforce 109
Annex3: List of all laws, regulations and other material consulted115
Annex 4: Persons interviewed during the on-site visit 117
ABOUT THE GLOBAL FORUM 5
About the Global Forum

The Global Forum on Transparency and Exchange of Information for
Tax Purposes is the multilateral framework within which work in the area
of tax transparency and exchange of information is carried out by over
130jurisdictions, which participate in the Global Forum on an equal footing.
The Global Forum is charged with in-depth monitoring and peer
review of the implementation of the international standards of transparency and exchange of information for tax purposes. These standards are
primarily reflected in the 2002 OECD Model Agreement on Exchange of
Information on Tax Matters and its commentary, and in Article26 of the
OECD Model Tax Convention on Income and on Capital and its commentary as updated in 2004. The standards have also been incorporated into
the UN Model Tax Convention.
The standards provide for international exchange on request of foreseeably relevant information for the administration or enforcement of the
domestic tax laws of a requesting party. Fishing expeditions are not authorised
but all foreseeably relevant information must be provided, including bank
information and information held by fiduciaries, regardless of the existence
of a domestic tax interest or the application of a dual criminality standard.
All members of the Global Forum, as well as jurisdictions identified by
the Global Forum as relevant to its work, are being reviewed. This process is
undertaken in two phases. Phase 1 reviews assess the quality of a jurisdictions legal and regulatory framework for the exchange of information, while
Phase2 reviews look at the practical implementation of that framework. Some
Global Forum members are undergoing combined Phase1 and Phase2
reviews. The Global Forum has also put in place a process for supplementary
reports to follow-up on recommendations, as well as for the ongoing monitoring of jurisdictions following the conclusion of a review. The ultimate goal is
to help jurisdictions to effectively implement the international standards of
transparency and exchange of information for tax purposes.
All review reports are published once approved by the Global Forum
and they thus represent agreed Global Forum reports.
For more information on the work of the Global Forum on Transparency
and Exchange of Information for Tax Purposes, and for copies of the published review reports, please refer to www.oecd.org/tax/transparency and
www.eoi-tax.org.
Executive summary 7
Executive summary
1.
This report summarises the legal and regulatory framework for
transparency and exchange of information in Saudi Arabia, as well as the
practical implementation of that framework. The international standard which
is set out in the Global Forums Terms of Reference to Monitor and Review
Progress Towards Transparency and Exchange of Information, is concerned
with the availability of relevant information within a jurisdiction, the competent authoritys ability to gain timely access to that information, and in turn,
whether that information can be effectively exchanged with its exchange of
information (EOI) partners. The assessment of effectiveness in practice has
been performed in relation to a three-year period: from 1January 2012 to
31December 2014.
2.
Saudi Arabias economy, which is for an important part based on the
oil sector, opened up to foreign investment early in the 21st century, resulting in a significant increase in foreign direct investment in recent years. The
Saudi Arabian tax system is built around an income tax and zakat, which are
complementary. Income tax is levied from non-Saudi citizens while zakat is
levied from Saudi citizens.
3.
Availability of ownership and identity information in respect of
companies is generally ensured by the requirement to keep an up to date
shareholder register. The Ministry of Commerce and Industry (MCI) verifies
the completeness and the correctness of the register of joint stock companies
on an annual basis. For listed joint stock companies the register is kept up-to
date by the Capital Market Authority (CMA) on a daily basis. Updates are
electronically registered in the Depository and Settlement System in the
Securities Depository Centre at the Saudi Stock Exchange. A transfer of
shares of limited liability companies requires an amendment of the articles of
association, and this can only be done after approval of MCI and the execution before a notary. As the transfer only becomes legally effective after the
completion of the procedure, this ensures that ownership information in
respect of limited liability companies is available with the MCI. Joint stock
companies and partnerships limited by shares have a possibility to issue
bearer shares under the Companies Law, although Saudi Arabia clarified that
registration of these entities would not be accepted in these circumstances
8 Executive summary
and details of all shareholders must be provided to MCI upon incorporation.
No issues in this respect came up in practice. In addition, this possibility is
negated by the obligation of relevant entities and arrangements under tax
and zakat law to identify all owners and submit this information to the tax
authorities with the annual tax return or zakat declaration.
4.
Both partnerships and endowments (waqfs) must be registered with
the authorities in Saudi Arabia. In respect of partnerships, ownership information must be provided upon registration and must be updated regularly. In
respect of supervision and overview, all measures to ensure compliance with
registration, filing and payment requirements by companies apply to partnerships similarly. Identity information on waqfs is kept directly by the Waqf
Administration, which is part of the Ministry of Islamic Affairs. The Waqf
Administration registers this information in its electronic database. Field
inspections may take place by the Waqf Administration to ensure compliance
and to keep oversight. Saudi Arabia further explains that major investments
have to be approved separately by the High Waqf Council. As regards resident trustees of foreign trusts, further guidance is needed on what ownership
information should be maintained by the trustee.
5.
An obligation to keep reliable accounting records including underlying documentation for a period of at least five years is generally in place in
respect of companies and partnerships. However, no express requirements
exist for partnerships with a capital of SAR100000 (EUR24159) or less
to keep underlying documentation or to keep documentation for at least five
years. Compliance is reviewed within the course of regular tax proceedings, e.g.during a tax audit by local and regional tax offices. With respect
to waqfs, the accounting records, including underlying documentation, are
generally kept directly by the Waqf Administration.
6.
Compliance with the requirement to maintain accounting records
and underlying documentation by all legal or accounting entities under the
tax law is monitored also by the MCI and the Capital Market Authority. Joint
stock companies, limited liability companies and partnerships limited by
shares are subject to a statutory audit, and they are required to prepare an
annual report, including the auditors report and the financial statements.
Because of this statutory obligation, these entities and arrangements must
have their accounts audited. Furthermore, the approved financial statements
have to be filed with MCI. Nevertheless, compliance with a timely submission to MCI was relatively low during part of the period under review.
Although steps taken by MCI to reduce the number of late filings or nonfilings as well as the recent introduction of a specific database known as
Qawaem seem to have solved this issue, it is recommended that Saudi Arabia
monitors this issue to ensure that reliable accounting records, supported by
underlying documentation, are kept by all the entities and arrangements.
Executive summary 9
7.
The obligations under the AML/CFT legislation ensures that all
records pertaining to the accounts as well as to related financial and transactional information are required to be kept by Saudi Arabian banks. Compliance
by banks in respect of these legal obligations is checked and supervised by the
Saudi Arabian Monetary Agency (SAMA). Through their inspections, it has
been established that banks keep the required information on their clients and
transactions.
8.
The Department of Zakat and Income Tax has broad powers to
obtain information for exchange purposes, irrespective of whether Saudi
Arabia needs the information for their own purposes, where the agreement
contains a provision corresponding to Article26(4) of the OECD Model Tax
Convention. This is because the hierarchy of laws in Saudi Arabia, based on
the Islamic Shariah, places international agreements providing for exchange
of tax information above domestic legislation, once the international agreement is implemented in Saudi Arabian domestic law by Royal Decree. For
the same reason, Saudi Arabian authorities can obtain information from
banks when requested to do so under an information exchange agreement
containing a provision corresponding to Article26(5) of the OECD Model
Tax Convention. However, this is currently only the case for 23 out of 43 of
Saudi Arabias agreements.
9.
Saudi Arabia has the possibility to apply search and seizure powers
in order to obtain information from persons subject to income tax. In addition, zakat payers may be refused a zakat certificate if they refuse to provide
information for EOI purposes. Furthermore, Saudi Arabia introduced some
amendments in 2014 to clarify that a person can be held jointly liable for the
tax due on a Saudi Arabian taxpayer, if this person does not provide information for EOI purposes. All these compulsory powers are, however, not very
well adapted to obtaining information for EOI purposes, and Saudi Arabia
should therefore review its powers for compelling the provision of information for EOI purposes to ensure access to this information.
10.
Saudi Arabia has a network of Double Taxation Conventions covering 43jurisdictions. In addition, Saudi Arabia also signed the Convention on
Mutual Administrative Assistance in Tax Matters, as amended (Multilateral
Convention) in May 2013. Saudi Arabia ratified the Multilateral Convention
and deposited its instrument of ratification on 17December 2015. The
Multilateral Convention will enter into force on 1April 2016. Once in force,
it will provide Saudi Arabia with an EOI network that covers a total of
102jurisdictions. These agreements, as well as the Multilateral Convention,
all contain provisions that would, in principle, allow the contracting parties
to exchange all relevant information. However, Saudi Arabias domestic law
does not allow it to access bank information, or to obtain information in the
absence of a domestic tax interest unless the information exchange agreement
10 Executive summary
contains provisions corresponding to Articles26(4) and 26(5) of the OECD
Model Tax Convention (which is generally the case for the recent agreements
as well as the Multilateral Convention). Consequently, Saudi Arabia is currently not in a position to exchange information according to the international
standard under 20 out of its 43DTCs. Nevertheless, the entry into force of the
Multilateral Convention will bring EOI with 36 of its 43DTC partners in line
with the standard. However,, it is recommended that Saudi Arabia should be
prepared to enter into agreements for exchange of information (regardless of
their form) with all relevant partners, meaning those partners who are interested in entering into an information exchange arrangement with it.
11.
The designated Competent Authority for exchanging information for
tax purposes under all Saudi Arabian exchange of information instruments
is the Minister of Finance or his authorised representative. The Department
of Zakat and Income Tax (DZIT) has been delegated this task. However,
the function of competent authority was shifted from the International
Economic Relations directorate within the Ministry of Finance to the international operations department within DZIT during the period under review.
It appears that peers had difficulty to clearly identify this change in the contact information for Saudi Arabias competent authority. Requests that were
still being sent to the Ministry of Finance were initially not answered, as it
appears that these requests did not arrive with DZIT. Since June 2015 contact
information for Saudi Arabias competent authority is fully identifiable on the
Global Forum website.
12.
Saudi Arabia has fairly limited experience in EOI but is considered
by its EOI partners to be an important partner. Saudi Arabia has received
nine requests for information over the period of review. From these nine
requests, initially only six requests actually arrived with DZIT. From these
six requests initially only one was replied to. More recently, Saudi Arabia
has communicated with its EOI partners regarding pending requests as well
as requests that were initially not received. As a result, information has been
exchanged in some cases, while in other cases the EOI partner has been
informed of the reason why information could not be exchanged.
13.
It appears that Saudi Arabia only recently implemented organisational processes to ensure effective exchange of information. During the
review period, no clear organisational processes were in place, which led to
EOI requests not being processed in a timely manner. Saudi Arabia should
therefore ensure that it has appropriate organisational processes in place
to process and answer to EOI requests in a timely manner. Saudi Arabia
should also respond to EOI partners in cases where it is not able to respond
to requests and provide status updates in cases where it is not in a position to
meet the 90day deadline.
Executive summary 11
14.
Saudi Arabia has been assigned a rating for each of the 10essential
elements as well as an overall rating. The ratings for the essential elements
are based on the analysis in the text of the report, taking into account the
Phase1 determinations, any recommendations made in respect of Saudi
Arabias legal and regulatory framework and the effectiveness of its exchange
of information in practice. On this basis, Saudi Arabia has been assigned the
following ratings: Compliant for elementsA.1, A.3, B.2, C.1, C.3 and C.4
Largely Compliant for elementsA.2 and B.1, and C.2 Partially Compliant for
elementC.5. In view of the ratings for each of the essential elements taken in
their entirety, the overall rating for Saudi Arabia is Largely Compliant.
15.
A follow up report on the steps undertaken by Saudi Arabia to
answer these recommendations should be provided to the PRG within twelve
months after the adoption of this report.
Introduction 13
Introduction
Information and methodology used for the peer review of Saudi Arabia
16.
The assessment of the legal and regulatory framework of Saudi
Arabia as well as its practical implementation was based on the international
standards of transparency and exchange of information as described in the
Global Forums Terms of Reference, and was prepared using the Methodology
for Peer Reviews and Non-Member Reviews. The assessment has been
conducted in two stages: the Phase1 review assessed Saudi Arabias legal
and regulatory framework for the exchange of information as at January
2013, while the Phase2 review assessed the practical implementation of this
framework during a three year period (1January 2012 to 31December 2014)
as well as amendments made to this framework since the Phase1 review up
to 23December 2015. The following analysis reflects the integrated Phase1
and Phase2 assessments.
17.
The assessment was based on the laws, regulations and exchange
of information mechanisms in force or effect as at December 2015, as well
as other information, explanations and materials supplied by Saudi Arabia,
information supplied by partner jurisdictions and explanations provided by
Saudi Arabia during the on-site visit that took place from 31May-4June 2015
in Riyadh, Saudi Arabia. During the on-site visit, the assessment team met a
wide range of officials and representatives of the Ministry of Finance and the
Department of Zakat and Income Tax (DZIT), as well as representatives of
the Ministry of Commerce and Industry, the Ministry of Justice, the Ministry
of Islamic Affairs and representatives of a local Waqf Administration, as well
as representatives of the Saudi Arabian Monetary Agency (SAMA) and the
Ministry of Foreign affairs, among others.
18.
The Terms of Reference (ToR) break down the standards of transparency and exchange of information into 10essential elements and 31enumerated
aspects under three broad categories: (A)availability of information; (B)access
to information; and (C)exchanging information. This review assesses Saudi
Arabias legal and regulatory framework and its application in practice against
these elements and each of the enumerated aspects. In respect of each essential
14 Introduction
element, a determination is made that either: (i)the element is in place; (ii)the
element is in place but certain aspects of the legal implementation of the
element need improvement; or (iii)the element is not in place. These determinations are accompanied by recommendations for improvement where
relevant. In addition, to reflect the Phase2 component, recommendations are
made concerning Saudi Arabias practical application of each of the essential
elements and a rating of either: (i)compliant, (ii)largely compliant, (iii)partially compliant, or (iv)non-compliant is assigned to each element. As outlined
in the Note on Assessment Criteria, an overall rating is applied to reflect
the jurisdictions level of compliance with the standards (see the Summary of
Determinations and Factors Underlying Recommendations at the end of this
report).
19.
The Phase1 and Phase2 assessments were conducted by assessment
teams comprising expert assessors and representatives of the Global Forum
Secretariat. The 2014 Phase1 assessment was conducted by a team which
consisted of two expert assessors and a representative of the Global Forum
Secretariat: Ms. Harizan Hussin, Principal Assistant Secretary (Head of
DTA and Bilateral Unit), Tax Analysis Division of the Ministry of Finance
of Malaysia; Mr. Brian Harrington, IRS Chief Counsel attorney, United
States; and Mr. Mikkel Thunnissen from the Global Forum Secretariat. For
the Phase2 assessment Mr. Thunnissen was assisted by Mr. Boudewijn van
Looij, also from the Global Forum Secretariat, while Ms. Harizan Hussin was
replaced by Mr. Bhaskar Goswami, Additional Commissioner of Income Tax,
India. The assessment team examined the legal and regulatory framework for
transparency and exchange of information and relevant exchange of information mechanisms in Saudi Arabia and their application in practice.
Overview of Saudi Arabia

20.
The Kingdom of Saudi Arabia (Saudi Arabia) covers 2149690
square kilometres, making up most of the Arab peninsula. It shares land
borders with Iraq, Jordan, Kuwait, Oman, Qatar, the United Arab Emirates
and Yemen. Riyadh is Saudi Arabias capital, with Mecca and Medina (holy
cities) and Dammam and Jeddah (economic centres) being the other main
cities. Saudi Arabias population is estimated to be around 26.5million,
of which more than 20% are non-nationals. The official language in Saudi
Arabia is Arabic.
21.
Saudi Arabias economy is estimated to have grown by more than
3% in 2014 after a slowdown caused by the global economic crisis and low
oil prices in 2009. This resulted in an estimated gross domestic product of
USD746billion in 2014. The Saudi Arabian economy is dominated by the
industrial sector which accounts for 57% of the economy, while services and
Introduction 15
agriculture make up 41% and 2% respectively.1 Oil forms the basis of the
economy and most importantly the industrial sector, as Saudi Arabia has one
of the largest proven oil reserves in the world and is one of the biggest exporters
of oil. Saudi Arabias main trading partners are the United States, the Peoples
Republic of China (China) and Japan, followed by Korea, India, Germany and
France. The official currency in Saudi Arabia is the Saudi riyal (SAR), which is
pegged to the US dollar. As at 27October 2015, SAR4.14 = EUR1.
Legal system
22.
The system of rule in Saudi Arabia is that of a monarchy. The King is
the Head of State and exercises executive power. The King is also the Prime
Minister and the Crown Prince is the Deputy Prime Minister. The Council
of Ministers assists the King in the performance of his duties and, besides
the King and the Crown Prince, comprises 21other ministers with portfolio
(backed up by government ministries) and seven ministers of state.
23.
In 1992 the Basic Law was ratified. It defines the Kingdom of Saudi
Arabia as an Arab and Islamic sovereign state, with Islam as its religion and the
Holy Quran and the Sunnah as its constitution. It also provides that government
in the Kingdom of Saudi Arabia is based on the premise of justice, consultation,
and equality in accordance with the Islamic Shariah (Section8, Basic Law),
making the Shariah the primary body of law in Saudi Arabia. Shariah also
binds the rulers of Saudi Arabia and it therefore serves as a guideline for all legal
matters. In general, Shariah law is derived primarily from the Holy Quran and
secondarily from the Sunnah as noted down in hadith. The third source is Ijma,
the consensus of opinion of Muslim scholars on the principles involved in a specific case. Qias, reasoning by analogy, is the fourth source of Shariah law.
24.
Shariah law is not codified as such. Specific legislation, which must
be based on Shariah law, is adopted by resolution of the Council of Ministers
and then ratified by the King, making it a Royal Decree. The Consultative
Council (Majlis al-Shura), consisting of 150members, usually advises on
legislation and may also propose new or amending legislation. Both the
members of the Council of Ministers and of the Consultative Council are
appointed by the King. International agreements, like domestic legislation,
are implemented in domestic law by Royal Decree. Saudi Arabia recognises a
hierarchy of laws that is based on the principles of the Shariah. One of these
principles is that laws that are directed to the good of humanity in general
shall have precedence over laws applying to specific persons or a specific
group of persons. In this hierarchy, as explained by Saudi Arabia, international agreements generally take precedence over domestic laws as they are
1.
World CIA Factbook https://www.cia.gov/library/publications/the-world-factbook/

geos/sa.html (accessed 23December 2015(.
16 Introduction
considered for the larger good of humanity as opposed to domestic laws that
cater to a smaller group.
25.
The main part of Saudi Arabias court system is formed by the
Shariah courts, which have general jurisdiction over most civil and criminal cases. Cases are generally brought to the Courts of the First Instance
(Summary and General Courts), and their decisions may be appealed to the
Courts of Cassation and the Supreme Judicial Council. Supplementing the
Shariah courts is the Board of Grievances, which mainly hears cases that
involve the government. The third part of the Saudi court system consists of
various committees within government ministries that address specific disputes, including tax disputes (dealt with by the Tax Committees). Finally, the
King acts as the final court of appeal and as a source of pardon.
Investment and financial sector

26.
In 2000 a new foreign investment law was enacted, opening up the
Saudi Arabian economy to foreign investors. A license can now be obtained
from the Saudi Arabian General Investment Authority (SAGIA) for any type
of foreign investment, unless it is included in the Negative List (which includes
the exploration and production of petroleum substances and a number of
specified services). For some activities, such as distribution services (trading)
and real estate projects, a considerable minimum investment must be made in
order to obtain an investment license from SAGIA. Foreign investors often set
up a limited liability company through which to conduct their business, which
is subject to further approval of the Ministry of Commerce and Industry. The
restructuring of its investment climate made it possible for Saudi Arabia to
join the World Trade Organization in December 2005.
27.
The Foreign Direct Investment (FDI) statistics show the developments
in Saudi Arabias investment climate. After being steady for many years, the
FDI stock invested in Saudi Arabia increased from USD17577million in
2000 to USD242600million in 2014, with the most significant rise in recent
years. In 2014 the inward FDI flows averaged USD8012million, while the
outward FDI flows averaged USD5396million.2
28.
The main regulator and supervisor of the financial sector is the Saudi
Arabian Monetary Agency (SAMA). This institution acts as the Central Bank
and supervises commercial banks and insurance companies. Investment funds
are regulated and supervised by the Saudi Arabian Capital Market Authority.
All banks must be licensed by SAMA and are subject to the Banking Control
2.
Data drawn from the United Nations Conference on Trade and Development
(UNCTAD), available on http://unctadstat.unctad.org (accessed 23December
2015).
Introduction 17
Law. The banking sector comprises 12 domestic banks and 12 branches of

foreign banks. The assets in the (commercial) banking sector amounted to
SAR2132577million (EUR515115million) as at December 2014. The
total assets managed by investment companies stood at SAR82.2billion
(EUR16.6billion) (domestic assets SAR64.5billion (EUR13billion), foreign
assets SAR17.7billion (EUR3.6billion)) in December 2011. Insurance companies are not allowed to conduct commercial for-profit insurance business.3
29.
The Capital Market Authority is responsible for regulating and overseeing the Saudi Stock Exchange (Tadawul) and related activities. As at July
2012, 154companies were listed on the Tadawul and their shares represented
a market value of SAR1426billion (EUR344billion).
30.
All providers of financial services, trust services and company services, as well as lawyers and accountants are subject to obligations under
AML/CFT legislation. In this regard they must carry out customer due diligence and report any suspicious transactions to the Saudi Arabia Financial
Intelligence Unit, which is an autonomous authority under the Ministry of
the Interior.
Taxation and international cooperation

31.
The Saudi tax system is built around an income tax and zakat, which
are complementary. The basic distinction is that income tax is levied on nonSaudi citizens while zakat is levied on Saudi citizens. A Saudi citizen is defined
as a person4 holding Saudi nationality or who is treated as such. This means
that nationals from one of the member states of the Cooperation Council for
the Arab States of the Gulf, also known as Gulf Cooperation Council (GCC)5,
are also regarded as Saudi citizens for income tax and zakat purposes.
Income tax
32.
3.
4.
5.
Persons subject to income tax are:

Companies resident in Saudi Arabia to the extent of the participation

of non-Saudi citizens.
Individuals who are non-Saudi citizens but resident in Saudi Arabia

and conducting business there.
The data in this paragraph was drawn from publications available on the website
of the Saudi Arabian Monetary Agency: www.sama.gov.sa/sites/samaen/Pages/
Home.aspx.
A person is defined as any natural or corporate person.
Current GCC member states are: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia
and the United Arab Emirates.
18 Introduction

Non-residents conducting business in Saudi Arabia through a permanent establishment or having other taxable income from sources
within Saudi Arabia.
Any person engaged in natural gas investment and/or oil and hydrocarbons production in Saudi Arabia.
33.
A company is considered resident in Saudi Arabia if it is either
formed in accordance with the Companies Law or if its central management
is located in Saudi Arabia. The tax base for resident companies includes their
worldwide income. The tax rate is 20% on regular income, 30% on income
from natural gas investment activities and 85% on income from oil and
hydrocarbon production.
34.
Resident individuals are only subject to income tax if they are nonSaudi citizens conducting business in Saudi Arabia.6 The tax rates are the
same as for companies.
35.
Partnerships are considered tax transparent and tax is levied on the
partners directly according to the rules for either individuals or companies,
depending on the legal status of the partner. A non-resident partner in a Saudi
Arabian partnership is considered to have a permanent establishment in Saudi
Arabia. Partnerships are required to file returns of income, even though the
incidence of tax or zakat as the case may be, is upon the partners.
36.
Non-residents are subject to income tax on any income from sources
in Saudi Arabia. With the exception of income attributable to a permanent
establishment in Saudi Arabia, income from non-residents is subject to a
withholding tax, including dividends (except those paid by companies in the
oil and gas sector), loan charges (interest), royalties, management fees, rents
and payments for technical and consulting services. The withholding tax
rates vary from 5% to 20%. Payments for other services are also subject to a
withholding tax of 15% and this includes any work performed for compensation except for the purchase and sale of goods.
Zakat
37.
Zakat can be characterised as a direct tax on property and income
which is levied in accordance with Shariah from all Saudi citizens and
Saudi companies and partnerships to the extent of the participation of Saudi
citizens. Private waqfs, dedicated to the benefits of certain persons, may also
be subject to zakat. Zakat is levied on the payers capital resources and its
proceeds, receipts, profits and gains. Zakat is levied at a rate of 2.5%.
6.
Excluding the (Saudi and non-Saudi) persons engaged in natural gas investment
and/or oil and hydrocarbons production in Saudi Arabia.
Introduction 19
38.
In respect of companies, the capital contributed by Saudi citizens at
the beginning of the year and the net profits of the company attributable to
the participation of Saudi citizens are subject to zakat. Where a company has
both Saudi and non-Saudi citizens as shareholders, its profits are subject to
zakat and income tax proportionate to the participation of the two groups of
shareholders. This same principle applies to partnerships.
International cooperation
39.
As a member of the G20, Saudi Arabia became a member of the
Global Forum at its restructuring in 2009. Saudi Arabia started concluding
Double Taxation Conventions (DTCs) including a provision on the exchange
of information in 2006. It now has a network of 43DTCs. Exchange of tax
information is delegated to the Department of Zakat and Income Tax.
Recent developments
40.
Saudi Arabia reports that on 9November 2015, the Ministry of
Commerce and Industrial (MCI) announced the new Saudi Companies Law.
The new law will come into force on 2May 2016, being 150days after its
publication in the Official Gazette, which occurred on 4December 2015.
When effective, it will entirely replace the current Companies Law that dates
from 1965.
41.
The new Companies Law represents a significant overhaul and modernisation of the Saudi Companies Law. Some of the key aspects of the new
law include a reduction of the number of corporate Forms. Three of the corporate forms permitted by the current regime, namely Cooperative Companies,
Partnerships Limited by Shares, and Variable Capital Companies, have been
eliminated, and it will no longer be possible to establish such companies.
42.
In respect of Limited Liability Companies (LLCs) the main changes
include the possibility to establish a LLC with only one shareholder, while
under the current law a minimum of two shareholders were required. In cases
where the number of shareholders in an LLC exceeds 50, the company should
be converted to a joint stock company within a one year time period (otherwise the company shall be considered dissolved). Another change relates to
the publication when incorporating and amending articles of association. In
these cases publication on MCIs website will be sufficient instead of publication in the official gazette or a newspaper.
43.
With regard to Joint Stock Companies (JSCs) the number of shareholders required for a Closed JSC will be reduced from five to two shareholders,
although a one-person joint stock company may also be incorporated under
certain (more restricted) circumstances. The minimum capital required for
20 Introduction
JSCs has been reduced from SAR2million (EUR483180) to SAR500, 000
(EUR120795). Furthermore, JSC general meetings may be convened by using
new technology, no longer necessitating the physical presence of everyone
involved. The new law permits a JSC to issue debt instruments and financing
instruments (Sukuks). Furthermore, JSCs are allowed to purchase or mortgage
their shares. Further provisions set out that the external certified auditor can be
appointed for a continuous period of five years. The new law also obliges partnerships and a branch of the foreign company to have its accounts audited by a
licensed external auditor. The new Company Law has no provision for issuance
of bearer shares by any entity.
44.
As noted, Saudi Arabia signed the Multilateral Convention in May
2013. Saudi Arabia ratified the Multilateral Convention and deposited its
instrument of ratification on 17December 2015. The Multilateral Convention
will enter into force on 1April 2016.
Compliance with the Standards: Availability of information 21
Compliance with the Standards
A. Availability of information
Overview
45.
Effective exchange of information requires the availability of reliable
information. In particular, it requires information on the identity of owners
and other stakeholders as well as information on the transactions carried out
by entities and other organisational structures. Such information may be kept
for tax, regulatory, commercial or other reasons. If such information is not
kept or the information is not maintained for a reasonable period of time,
a jurisdictions competent authority may not be able to obtain and provide
it when requested. This section of the report describes and assesses Saudi
Arabias legal and regulatory framework on availability of information as
well as its application in practice.
46.
Availability of ownership and identity information in respect of
companies is generally ensured by the requirement to keep an up to date
shareholder register. The Ministry of Commerce and Industry (MCI) verifies
the completeness and the correctness of the register of joint stock companies
on an annual basis. For listed joint stock companies the register is kept up-to
date by the Capital Market Authority (CMA) on a daily basis. Updates are
electronically registered in the Depository and Settlement System in the
Securities Depository Centre at the Saudi Stock Exchange. A transfer of
shares of limited liability companies requires an amendment of the articles of
association, and this can only be done after approval of MCI and the execution before a notary. As the transfer only becomes legally effective after the
completion of the procedure, this ensures that ownership information in
respect of limited liability companies is available with the MCI.
22 Compliance with the Standards: Availability of information

47.
Joint stock companies and partnerships limited by shares have a
possibility to issue bearer shares under the Companies Law, although Saudi
Arabia clarified that registration of these entities would not be accepted in
these circumstances and details of all shareholders must be provided to the
Ministry of Commerce and Industry upon incorporation. No issues in this
respect came up in practice. In addition, this possibility should be negated by
the obligation under tax and zakat law to identify all owners and submit this
information to the tax authorities with the annual tax return or zakat declaration. Compliance with these requirements is checked by DZIT through desk
and field audits in respect of all zakat and income tax payers and is further
secured by penalties that have been applied in practice.
48.
In Saudi Arabia, partnerships are governed by the same law as companies, the Companies Law (CL), and the definition of the term company
also applies to partnerships. Partnerships must be registered with the authorities and details of each partner must be furnished upon registration. Any
change in this respect must also be registered, ensuring up to date ownership
information on partnerships. In respect of supervision and overview, all
measures to ensure compliance with registration, filing and payment requirements by companies apply to partnerships similarly.
49.
All waqfs (a concept similar to an endowment) are required to register with the Waqf Administration belonging to the Ministry of Islamic Affairs
and Waqf. The Waqf Administration directly manages all public charitable
waqfs and supervises the private waqfs. It keeps identity information on all
these waqfs. The Waqf Administration registers this information in its electronic database. Field inspections may take place by the Waqf Administration
to ensure compliance and to keep oversight. Saudi Arabia further explains
that major investments have to be approved separately by the High Waqf
Council. In respect of foreign trusts with a Saudi Arabian trustee, further
guidance should be introduced on what (ownership) information must be
obtained by the trustee under AML/CFT legislation.
50.
An obligation to keep reliable accounting records including underlying documentation for a period of at least five years is generally in
place in respect of companies and partnerships. An express requirement
to keep underlying documentation or to keep documentation for at least
five years applies under the Commercial Books Law and the Income Tax
Law. Compliance is reviewed within the course of regular tax proceedings,
e.g.during a tax audit by local and regional tax offices. This requirement does, however, not cover partnerships with a capital of SAR100000
(EUR24159) or less. With respect to waqfs, the accounting records, including underlying documentation, are generally kept directly by the Waqf
Administration.
51.
Compliance with the requirement to maintain accounting records
and underlying documentation by all legal or accounting entities under the
tax law is monitored also by the MCI and the Capital Market Authority. Joint
stock companies, limited liability companies and partnerships limited by
shares are subject to a statutory audit, and they are required to prepare an
annual report, including the auditors report and the financial statements.
Because of this statutory obligation, these entities and arrangements must
have their accounts audited. Furthermore, the approved financial statements
have to be filed with MCI (and this would be in the hands of the tax authority). However, compliance with a timely submission to MCI was relatively
low during part of the period under review. And, although compliance with
the accounting requirements is also reviewed within the course of regular tax
proceedings, e.g.during a tax audit by local and regional tax offices, it should
be noted that there is no full overlap between the companies that are registered with MCI and the companies that are registered as tax or zakat payers
with DZIT. The number of companies registered with MCI substantially
exceeds the number companies that are registered with DZIT. Although steps
taken by MCI to reduce the number of late filings or non-filings as well as the
recent introduction of a specific database known as Qawaem seem to have
solved this issue, it is recommended that Saudi Arabia monitors this issue to
ensure that reliable accounting records, supported by underlying documentation, are kept by all the entities and arrangements.
52.
The obligations under the AML/CFT legislation ensure that all records
pertaining to the accounts as well as to related financial and transactional
information are required to be kept by Saudi Arabian banks. Compliance by
banks in respect of these legal obligations is checked and supervised by the
Saudi Arabian Monetary Agency (SAMA). Through their inspections, it has
been established that banks keep the required information on their clients and
transactions.
53.
Enforcement provisions are in place in respect of the relevant obligations to maintain ownership and identity information for all relevant entities.
These enforcement provisions are adequately applied in practice and generally ensure that ownership information with regard to the relevant entities is
available.
A.1. Ownership and identity information

Jurisdictions should ensure that ownership and identity information for all relevant
entities and arrangements is available to their competent authorities.
Companies (ToRA.1.1)
54.
Under section1 of the CL, a company is defined as a contract under
which two or more persons undertake to participate in an enterprise together,
with each contributing a share in the form of money or services, with a view
to dividing any profits or losses (incurred) as a result of such enterprise. This
definition comprises not only the concept of a company, but also that of a
partnership, and the CL governs both types of entities. The term partner
is used to refer to any person participating in the enterprise, whether as a
shareholder or otherwise. The entities that may issue shares are discussed
in this section of the report, as their characteristics are most similar to those
of companies. The other entities governed by the CL are discussed in sectionA.1.3 (Partnerships) of this report.
55.
The following main types of companies can be distinguished:

Joint stock companies: these entities must have at least five shareholders, whose liability is limited to the amount payable on their shares.
The shares in joint stock companies are freely transferable. As at
29April 2015, there were 1098joint stock companies registered.
Limited liability companies (also referred to as limited liability partnerships, but the characteristics of this type of entity are more in line
with those of a company): these entities must have at least two but
not more than fifty shareholders. The shareholders are liable to the
extent of their share in the companys capital, although in practice
the courts generally do not recognise this as it is not supported by the
corporate concepts of Shariah law. Shares are transferred before a
public notary after having obtained the approval of the Ministry of
Commerce and Industry and, if the company has foreign shareholders, the Saudi Arabian General Investment Authority. As at 29April
2015, there were 37709limited liability companies registered.
Partnerships limited by shares: an entity which has at least one general partner, who is personally liable for the partnerships debts, and
at least four limited partners, who are liable for the partnerships
debts only to the extent of their shares in the capital of the partnership. The limited partners own shares as proof of their interest in the
partnerships capital. As at 29April 2015, there were no partnerships
limited by shares registered.
56.
It can be noted that the number of registered companies dropped
quite considerably, by approximately 30%, since 2012. In this respect, Saudi
Arabia explains that this relates to the introduction, in 2013, of fees for registration with the Chamber of Commerce. The fees apply both for the initial
registration, as well as the yearly renewal. As a consequence, a significant
number of (mainly inactive) companies where liquidated or merged after
these fees were introduced. Statistics provided by Saudi Arabia demonstrate
that in total 31746 commercial registration certificates (CRs) were issued
during the years 2012-14. This number includes individual businesses that
are not in the form of companies. In 3614cases (around 11%) there was no
renewal of the CR, as Saudi Arabia explains these cases mainly reflect situations where the companies involved did not actually start business operations
after they got their CRs.
57.
Where the companys articles of association or bylaws provide that its
capital may be increased by additional payments made by the shareholders, or
by the admission of new shareholders, or that their capital may be reduced by
withdrawal of shareholders shares from the capital, it is also referred to as a
variable capital company (s.181 CL).
58.
Joint stock companies and limited liability companies may also be set
up as cooperative companies when they have the objective of reducing the
cost, purchase, or sale price of certain products or services by engaging in
the business of producing or brokering (s.189 CL). A cooperative company
remains subject to the provisions governing either the joint stock companies
or the limited liability companies, depending on their form (s.190 CL).Saudi
Arabia reports that, as at 29April 2015, there were no cooperative companies registered.
59.
All companies formed under Saudi Arabian law are required to establish their head office in Saudi Arabia and are deemed to have Saudi Arabian
nationality (s.14 CL).
60.
Registered shares (as opposed to bearer shares, see sectionA.1.2) in
a joint stock company shall be transferred by means of entry in the shareholders register kept by the company. This register must contain the name,
nationality, residence address and occupation of each shareholder, and the
number of shares held by him, with the amount paid up on such shares (s.102
CL). These rules equally apply to partnerships limited by shares (s.155
CL). In regard to joint stock companies, the register is verified annually by
a representative from the MCI who is present during the general assembly
meeting. In respect of listed joint stock companies, Saudi Arabia explains
that the Capital Market Authority (CMA) updates the register daily. Updates
are electronically registered in the Depository and Settlement System in
the Securities Depository Centre at the Saudi Stock Exchange. Regarding
the obligation to keep the shareholders register, Saudi Arabia reports that

there were no cases of non-compliance and therefore no penalties had been
imposed during the period under review.
61.
Limited liability companies shall keep a register containing the
shareholders names, the number of shares held by them and the transactions
affecting such shares. A transfer of shares is effective only after the reason
of such transfer has been entered into the register (s.166 CL).The articles
of association must at least include the same information as is included in
the shareholders register. Share transfers can only be accomplished through
amendment of the articles of association. Shares are transferred before a
public notary (who is supervised by the Ministry of Justice) after having
obtained the approval of the Ministry of Commerce and Industry and, if the
company has foreign shareholders, the Saudi Arabian General Investment
Authority.
62.
Any official from a company who fails to observe the obligation to
keep a shareholder register is liable to imprisonment for a period of at least three
months, but not more than one year, to a fine of at least SAR5000 (EUR1207)
but not more than SAR20000 (EUR4830), or both (s.229(8)CL).
Ownership information held by the authorities

63.
The articles of association of a company and any amendments thereto
must be recorded in writing in the presence of a registrar (s.10 CL). The registrar is commonly known as a public notary and is in fact a public officer
of the Ministry of Justice. The registrar keeps a register of all companies
formed in Saudi Arabia and the information kept by him includes the latest
articles of association. Standard templates of articles of association have been
issued in respect of the different types of companies. The templates for joint
stock companies and partnerships limited by shares do not require full ownership information to be included. However, the names of the general partners
in a partnership limited by shares must be included (s.151 CL).
64.
In respect of limited liability companies, the articles of association
must at least include the same information as is included in the shareholders
register (s.161 CL). This means ownership information is available at the
public notary.
65.
The incorporation of each company is announced by the Ministry of
Commerce and Industry. For joint stock companies and partnerships limited
by shares, the subscribers names and the number of shares subscribed to by
each should also be furnished to the Ministry of Commerce and Industry,
in order to obtain a decision announcing the companys incorporation (s.63
CL). For limited liability companies, only the names of the subscribers contributing in kind must be provided to the Ministry of Commerce and Industry
(s.161 CL).
66.
Within 15-30days of the decision of the Minister of Commerce to
declare the founding of the company, all company forms are required to be
registered in the Register of Companies that is maintained by the General
Administration of Companies within the Ministry of Commerce and Industry
(s.21, 65, 164 and 200 CL).
Commercial Register
67.
In addition to recording its articles of association with the public
notary and providing certain details to the Ministry of Commerce and
Industry, companies must also apply for registration in the Commercial
Register within thirty days of the date on which its articles of association was
recorded at the public notary (s.52 CL and s.3 Commercial Register Law
(CRL)). The following details must be registered:
a. the type of company and its trade name;
b. the companys activity;
c. the companys capital;
d. the date of the companys incorporation and expiration;
e. the names, place and date of birth, address and nationality of the
managers of the company and the signatories on their behalf; and
f.
the address of the head office of the company and its branches and
agencies inside and outside Saudi Arabia.
68.
A copy of the companys articles of association and its bylaws (if
any) must also be provided. The manager of the company shall apply for
registration of any amendment to the information already registered within
thirty days of the occurrence of the amendment (s.4CRL). Non-compliance
with the registration requirements can result in a fine of not more than
SAR50000 (EUR1207510094) (s.15CRL).
In practice
69.
As noted, incorporation of companies includes the involvement of
the Ministry of Justice (public notary) and the Ministry of Commerce and
Industry. In practice, the articles of association of each company are reviewed
by the Ministry of Commerce and Industry before being referred to the public
notary. The public notary will only authenticate the articles of association
after it has certified that these documents have been reviewed by the Ministry
of Commerce and Industry. Following this, the Ministry of Commerce and
Industry in its turn, will not register a company in the Commercial Register
unless it has the articles of association authenticated by the public notary.

70.
In respect of limited liability companies, all shareholder information
is stated in the articles of association. This document is registered both with
the public notary and with the Ministry of Commerce and Industry. After
the initial registration, any transfer of shares of a limited liability company
is based on a sale and purchase agreement and involves an amendment of the
articles of association. This amendment can only be made after approval of
the Ministry of Commerce and Industry and the execution before the public
notary. A copy of the shareholder resolutions to amend the articles will then
be published in the Official Gazette and one daily newspaper, by the company seeking the amendment. After this publication, a request should be
made to MCI for it to issue an amended commercial registration certificate.
As the transfer becomes legally effective only after the completion of this
procedure, it ensures that ownership information in respect of limited liability companies is available with both the public notary (under the Ministry of
Justice) and the Ministry of Commerce and Industry.
71.
With respect to joint stock companies and partnerships limited by
shares, transfers of shares are only reported to an authority if the company
is listed on the Saudi Stock Exchange. For this purpose, a fully automated
system is kept by the Capital Market Authority. As noted above, ownership
information concerning non-listed joint stock companies and non-listed partnerships by shares is available with the company.
Tax and zakat law

72.
Saudi Arabia has to a large degree integrated zakat with income
tax. It established the Department of Zakat and Income Tax (DZIT) under
the Ministry of Finance by Ministerial Resolution no.394, dated 7/8/1370
H. (14/06/1951). DZITs Headquarters is in Riyadh. The Large Taxpayers
Administration that deals with large zakat and tax payers is also in Riyadh.
There are sixteen other DZITs branches in the main cities of the Kingdom,
which deal with zakat and tax payers in their areas. In addition, there are 42
Financial Offices (administratively report to Ministry of Finance) in smaller
cities and towns, which deal with zakat and taxpayers in their areas where no
DZIT branches exist.
73.
In the last five years DZIT has put great efforts to automate the
zakat and tax process and to improve and standardise procedures and forms
for zakat and taxpayers. As a result the collection of zakat/tax has to a large
degree been automated and zakat and tax payers can use the internet to deal
with procedures through a growing number of e-services online.7 The idea
7.
According to Saudi Arabia around 77% of return filing done electronically and
payments are done online by accessing an electronic payment system available
at all banks through the payment system that is known as SADDAD.
behind this is to improve the collection of zakat and tax through enhanced
compliance and a reduction in processing time. As a result, zakat and tax
revenues have been increasing at a rate of around 20 percent per year through
the last five years.
74.
To properly administer the income tax and zakat regimes, the Saudi
Arabian tax authorities need full ownership information of companies, as it
depends on the status of the shareholders (Saudi or non-Saudi) to determine
whether the companys income is subject to income tax or zakat, or both (see
also the Introduction). To facilitate this, all companies formed under Saudi
Arabian law should register with the Department of Zakat and Income Tax
(the tax authorities).
75.
In respect of the companies that have one or more foreign shareholders, the obligation to register is found in section57(a) of the Income Tax Law
(ITL). The registration form for companies contains a sheet for filling out
details on all of their shareholders, including their names, addresses, the date
on which the shares were acquired and the ownership percentage. The tax
authorities have stated that they send out a form to all taxpayers at the start of
every year requesting them to submit any changes to the registered details. In
addition, an income tax return must be filed on an annual basis (s.60ITL),
which requires the company to indicate whether changes have occurred in
its ownership and if so, to provide the updated ownership information. Noncompliance with the timely filing of the complete annual income tax return
can result in a penalty of maximum SAR20000 (EUR4830) or between 5%
and 25% of unpaid tax (s.76ITL).
76.
In total there are 280455 taxpayers and zakat payers in Saudi Arabia
as of 29April 2015. Statistics from DZIT further show that this number is
composed as follows:

registered taxpayers (Individuals): 4342
registered taxpayers (Companies): 6864
registered zakat payers (Individuals): 248679
registered zakat payers (Companies): 19990
77.
Companies had to register separately with DZIT during the three
year review period and fill out a subscription form on-line and submit a
number of documents, including the companies Commercial Registration.
Upon registration, DZIT allocates a TIN to the requesting company, as well
as a registration certificate that is valid for one year.8
8.
Registration, filing, payment and certification procedures are the same for all entities, whether taxpayers or zakat payers. If the mixed company is a capital company,
it is considered one legal entity regardless of its shareholders. If the mixed company

78.
During the review period, non-compliance with registration was
mostly detected by cross-checking payments reported by other tax and zakat
payers to recipients who should be identifiable in DZITs databases. Any
person who is resident in the Kingdom and is subject to zakat regulations
or income tax law should be registered with DZIT; in case it is found out
that payments are made to persons that are not registered for tax or zakat
purposes, DZIT would require registration of the taxpayer concerned and
a penalty would usually be imposed. In the last three years, the following
number of penalties for failure to register with DZIT has been imposed:
Registration penalties issued by DZIT
Type of entity
2012
2013
2014
Limited liability companies
2137
1451
1445
Joint stock companies
88
39
25
General partnerships
186
151
90
79.
As these statistics demonstrate, the number of registration penalties
generally dropped by 30% to 50% since 2012. However, it should also be noted
that the number of registered companies dropped in this period as well. As Saudi
Arabia explains a considerable number of inactive companies got cancelled and
were removed from the Chamber of Commerce registration, following a sharp
increase of the (initial and yearly) registration fees in 2013 (see section above). A
closer look at the number shows that the decrease in the number of registration
penalties keeps abreast with the number of registered entities and arrangements
in Saudi Arabia, as there was a comparable decrease in the same period.
80.
A similar pattern can be noted in respect of the filing penalties
that DZIT imposed for non-timely or non-complete filing of the annual tax
returns, as can be demonstrated with the following statistics that were provided by Saudi Arabia.
Filing penalties issued by DZIT in respect of tax payers
Type of entity
2012
2013
2014
Limited liability companies
2457
1209
665
Joint stock companies
76
38
15
General partnerships
197
137
66
Limited Partnerships
17
is a partnership, the partnership itself is not subject to tax but it is required to file
information return, and each partner is required to file its own return showing the
result of all its activities including its share from the partnership.
81.
Companies that only have Saudi citizens as shareholders are not
subject to income tax (see also Introduction). However, these companies
are subject to zakat (s.2 Royal Decree on Zakat Regulations and s.1 Zakat
Regulations). This requires them to file an annual declaration to the tax
authorities (s.8 Zakat Regulations). If not already registered, the tax authorities register the company upon its first zakat declaration. The tax authorities
confirmed that the same details as for companies subject to income tax are
registered, and this information is updated annually following the same procedure as for such companies, including the annual submission of a zakat
declaration.
82.
While there are no monetary or criminal penalties for failure to register as a zakat payer or for failure to file the annual zakat declaration (which
includes ownership information), this will result in the denial by the tax
authorities to issue a zakat certificate. The zakat certificate is issued annually to certify that a person has complied with its duties to pay zakat, and is
required for a person to bid for contracts and obtain licenses to do business.
Moreover, Government agencies do not provide services nor make payments
to a party unless that party presents such a clearance certificate from DZIT.
According to the Saudi Arabian authorities it would be very difficult if not
impossible to (commercially) operate in Saudi Arabia without a valid zakat
certificate.
83.
Nevertheless, it should be noted that there is a significant difference
in the number of companies registered with the Ministry of Commerce and
Industry, which amounts to approximately 40000, and with DZIT, where
approximately 25000companies are registered. As Saudi Arabia explains,
the main reasons for this gap are primarily inactive companies that dont
trigger any zakat liability because they dont start any business activities.
However, there are no cases where the availability of relevant ownership and
identity information would solely depend on a registration of company with
DZIT.9 In addition it can be noted that monitoring in respect of the requirements to keep and update ownership information takes place primarily by the
MCI (see also A.1.6 below). This issue is therefore not likely to have influence on the availability of ownership information if an EOI partner would so
require.10
9.
10.
Full ownership information in respect of limited liability companies and partnerships is available with the MCI. The same information regarding joint stock
companies is included in the shareholder register that is kept by the company
itself (for listed joint stock companies this information is kept with the Capital
Market Authority.
Saudi Arabia states that it envisages to significantly reduce the gap further. As
Saudi Arabia explains this is a combined effort by all agencies concerned, and
DZIT is working closely with MCI to close this gap. Saudi Arabia notes that
Ownership information held by service providers

84.
Any person which is considered a financial or non-financial institution under the Anti-Money Laundering Law (AMLL) is required to verify
the identity of its clients at the outset of dealing with these clients or when
concluding transactions (s.5AMLL). The list of institutions covered by this
obligation includes persons practicing law, and persons providing accounting
or company services (s.1 AMLL and Regulation 1-2 AMLL).These service
providers must obtain and verify, among other details, the following information in respect of a company (Regulation 4-1 AMLL):
a. commercial registration issued by the Ministry of Commerce and
Industry; and
b. a copy of the identification card of the persons who own the company and whose names are provided in the articles of association and
their amendments.
85.
This puts an express obligation on the service provider to identify
all owners whose names are included in the articles of association of the
company. The articles of association of limited liability companies should
include the names of all owners. In respect of joint stock companies and
partnerships limited by shares the names of the owners are generally not
included in the articles of association, meaning that where such entity is a
client, the service provider is not obliged to identify all owners. However,
it should be noted that full ownership information on the legal owners is
available through the register that the company is required to maintain (see
above). Documentation in respect of the customer due diligence carried out
must be kept by the service provider for at least ten years after completing
the transaction (s.6 AMLL). Failure to carry out customer due diligence or
to keep the documentation for at least ten years can lead to imprisonment for
a period not exceeding two years and (or) a fine not exceeding SAR500000
(EUR120757) (s.20AMLL).
although MCI has no powers to strike off a company just for being inactive, it is
empowered to suspend services to companies that fail to comply with statutory
requirements, such as a failure to renew the Commercial Register or to submit
financial statements. Failures that can typically be associated with inactive
companies. In this respect Saudi Arabia further reports that to date, MCI has
suspended services to a total of 26143companies. In respect of 13132companies this was related to issues concerning the expiry of CR and non-filing of
financial statements, in the remaining 13011cases it was related to a non-filing
of financial statements. Saudi Arabia stresses that DZIT is working closely with
MCI to close the remaining gap.
86.
AML-related supervision on company service providers, including
accountants, is exercised by the Ministry of Commerce and Industry. Oversight
on the performance of auditing activity takes place by the Saudi Organisation
for Certified Public Accountants (SOCPA). SOCPA oversees accountants and
auditors, both with respect to their AML obligations, as well as the quality
of the review. All auditors are subject to independent monitoring and review
through desk audits and on-site inspections by SOCPA. In addition, there is
a joint Committee of MCI and SOCPA, chaired by MCI, to look at malpractices by accountants in respect of AML. In this respect, Saudi Arabia reports
that, to date, there has been no malpractice reported nor any fines or penalties
imposed. Supervision of lawyers is in the hands of the follow-up administration of the Ministry of Justice. The inspections could be targeted and sudden
(for instance in case of a complaint), or at random taking into account a variety
of factors. During inspections checks take place regarding license, contracts,
clients, staff and office signs to ensure that this information corresponds fully
with the license information of the concerned attorney office (Name, qualification, classification). Regarding the frequency of the inspections Saudi Arabia
explains that audit offices are reviewed based on an annual desk-audit. For
this purpose all audit offices are required to submit specified information to
SOCPA. In addition to these annual desk-audits field audits take place. All
audit offices are subject to field-audits by SOCPA. Large audit offices that are
licensed to audit stock companies will be subject of a field audit once every
three years. The other offices will be subject to such an audit every five years.
In addition SOCPA also conducts Sudden Field Inspections. Saudi Arabia
reports that SOCPA makes sudden field inspections of all audit offices at
least once a year to ensure compliance with specified procedures. The Joint
Investigation Committee looks at malpractices of auditors and accountants
reported by any party, such as SOCPA, individuals, Capital Market Authority,
DZIT and the Audit Bureau. Over the last two years more than 500 lawyer
offices were inspected Kingdom-wide including Riyadh, Makkah, Jeddah,
Dammam, Al-Khobar, Al-Ehsa, Al-Madina, Hail and Tabouk. As a result of
the inspections, it was found that that the major cases of non-compliance were
mainly related to cases of persons impersonating lawyers (95cases in 2014).
These cases were referred to the Prosecutor General. Apart from this, Saudi
Arabia explains that no major issues came up and inspections would confirm
that required information is generally available.
Foreign companies
87.
In general, foreign companies need a license to carry on business
in Saudi Arabia. As at June 2015, there were 5932companies wholly owned
by foreigners licensed to carry on business in Saudi Arabia. Any foreign
company that is licensed to open a branch or an office in Saudi Arabia must
register with the Commercial Register (s.6LCR). However, this registration

procedure with the Commercial Register, further specified in Implementing
Regulations, does not include the furnishing of full ownership information
on the foreign company.
88.
For purposes of the income tax, a foreign company is considered a
resident in Saudi Arabia if its central management is located in Saudi Arabia
(s.3(b)(2) ITL). The Saudi Arabian authorities report that only eight foreign
companies are centrally managed from Saudi Arabia. These companies must
register with the tax authorities as described above (under the heading Tax
and zakat law). Such registration process includes the furnishing of ownership information. This information is then updated through the annual tax
returns and zakat declarations, as well as through the practice of the Saudi
Arabian authorities to send out a form to all taxpayers at the start of every
year requesting them to submit any changes to the registered details.
89.
In practice, in order to be able to register with the Commercial
Register, a foreign company should first obtain a license from the General
Investment Authority (SAGIA). Such a license is also needed in cases where
a foreign company would buy shares in a Saudi company or in cases where it
would like to open a branch in Saudi Arabia In order to obtain such license,
the foreign company has to provide SAGIA with information, including ownership information, on the foreign entity, such as details about shareholders,
capital of the company and past experiences. At the same time DZIT will
allocate a TIN to the foreign company. SAGIA carries out field inspections to
ensure compliance by foreign investors with the license conditions and other
relevant legal provisions. Saudi Arabia notes that supervision in this respect
is further facilitated by the fact that since 2013 the Commercial Register is
linked directly with SAGIA.
Nominees
90.
Nominee shareholdings are not expressly regulated under Saudi
Arabias commercial laws, but nothing prevents shares from being held by
a nominee, although it is unclear what legal status a nominee contract has.
In any case, under the AMLL service providers must verify the identity
of their clients and also determine whether a client is acting on behalf of
another person, and if so, verify the identity of that other person (s.5 AMLL
and Regulation 4-4 AMLL). Service providers covered by these obligations
include financial institutions, lawyers, accountants and persons providing company services (s.1 AMLL and Regulation 1-2 AMLL). It may be
expected that providing nominee shareholding services is regarded a company service, although the term company services is not defined. In any
case, persons who would be expected to act professionally as a nominee
shareholder are generally covered by the obligations under the AMLL to
identify the person they are acting for. Non-compliance with these obligations
can lead to imprisonment for a period not exceeding two years and (or) a fine
not exceeding SAR500000(EUR120757) (s.20 AMLL).
91.
Nominee shareholders that are not service providers covered by the
AMLL do not have a specific legal obligation to retain identity information
on the person for whom they act as the legal owner. It may be expected that
such nominees do know who their client is in order to correctly perform their
duties as a nominee. In addition, these nominees might establish a relationship with a financial institution in Saudi Arabia (e.g.opening a bank account
to receive dividends on the shares they hold) and, as explained in the previous
paragraph, in that case the financial institution is required to verify the identity of the person for whom the nominee acts as a legal owner, and to retain
this information. In any case, the group of nominee shareholders not covered
by the AMLL would primarily consist of persons performing services gratuitously or in the course of a purely private non-business relationship and
is therefore likely to be limited. As to this, Saudi Arabia reports that ownership details of nominee shareholders that are not service providers will be
available at local financial institutions and are obtainable by the competent
authority to be exchanged with a partner under an effective treaty nominees
not acting by way of business which are not covered by AML obligations.
92.
In practice peers did not flag any issues regarding professional
or non-professional nominees during the period under review. The Saudi
Arabian competent authority, from its end, confirms that it did not encounter
any requests for this type of ownership information or any other practical
difficulties in this respect either.
Conclusion and practice

93.
The availability of ownership information on companies is ensured
by the requirement for all companies to keep a register of shareholders
including the details of all shareholders and any transfer of shares (except in
relation to bearer shares, see also A.1.2). In addition, ownership information
on limited liability companies is also available at the public notary and the
Commercial Register. Finally, all companies incorporated in Saudi Arabia
as well as foreign companies having their place of effective management in
Saudi Arabia must register with the tax authorities, which includes the furnishing of ownership information. This information is then updated through
the annual tax returns and zakat declarations as levy of income tax or zakat is
dependent on the proportion of Saudi and non-Saudi owners. Persons acting
professionally as a nominee shareholder must identify the person who they
are acting for as a nominee according to the AML/CFT legislation.
94.
In practice, the MCI verifies the completeness and the correctness
of the register of shareholders of all the joint stock companies on an annual
basis. This is checked by a representative of MCI that is present during the

shareholder meetings that take place on an annual basis. In addition, the
Capital Market Authority (CMA) up-dates the register of shareholders of
listed joint stock companies on a daily basis. Updates are electronically registered in the Depository and Settlement System in the Securities Depository
Centre at the Saudi Stock Exchange. Furthermore, a transfer of shares of limited liability companies requires an amendment of the articles of association,
and this can only be done after approval of the MCI and the execution before
a notary. As the transfer only becomes legally effective after the completion
of the procedure, this ensures that ownership information in respect of limited liability companies is available with the MCI. Requirements to register
with DZIT are ensured by cross checking this information with the information that is available through DZITs databases.
95.
Saudi Arabia did not receive any request related to ownership information in respect of companies during the review period. Accordingly, no
issue in respect of availability of ownership information regarding companies
was reported by peers.
Bearer shares (ToRA.1.2)

96.
With respect to limited liability companies, identity details of
all shareholders must be included in the articles of association and in the
shareholders register (ss.161 and 166 CL). In addition, a transfer of shares
is effective only after the reason of such transfer has been entered into the
register (s.166 CL). It is therefore not possible for anyone to own shares in a
limited liability company without having their name entered in the register
of members, thus bearer shares in limited liability companies do not exist in
Saudi Arabia.
97.
Section99 CL provides that a share of a joint stock company may be
issued to a registered holder or to bearer. Bearer shares are transferable by
mere delivery (s.102 CL). These rules equally apply to partnerships limited
by shares (s.155 CL). On the other hand, upon incorporation of these entities
the subscribers to the shares, or their representative, must sign a document
containing the subscribers name, address, occupation and nationality, as well
as the number of shares subscribed to (s.57 CL). The subscribers names and
the number of shares subscribed to by each should also be furnished to the
Ministry of Commerce and Industry in order to obtain a decision announcing
the companys incorporation (s.63 CL).
98.
The Saudi Arabian authorities state that they interpret the obligation
to identify and register all initial shareholders of a joint stock company as
a prohibition on bearer shares in general. The Ministry of Commerce and
Industry stated that they would not accept the registration of a company that
has issued bearer shares, and also indicated that they have never encountered
a joint stock company which had issued bearer shares, while representatives
of the Ministry of Commerce and Industry attend the shareholder meetings
of all joint stock companies on an annual basis (Article84 of the company
Law provides that companies are legally obliged to hold a general assembly
meeting every year). At these meetings, the representative of the Ministry of
Commerce and Industry must establish that the quorum (50%) is met and if
not, the meeting cannot take place. For this purpose, the representative checks
the capital and voting structure of the company, which includes a check of
the register of shareholders and other documentation relevant to determine
the percentage of shares and voting rights kept by each shareholder. In addition, the identity of the attendees or their proxies is checked. This means that,
whether or not all shareholders attend the meeting, the comprehensive checks
done by the representative of the Ministry of Commerce and Industry give a
decisive answer as to whether all the shares are in registered form and all the
shareholders are included. The checks performed by the representative of the
Ministry of Commerce and Industry are based on Article83 of the CL and
the MCI Operating Procedures.
99.
Notwithstanding the reference in the CL to bearer shares, joint stock
companies must also comply with tax and zakat law. As mentioned above
under A.1.1, the Saudi Arabian tax authorities need full ownership information of companies, as it depends on the status of the shareholders (Saudi or
non-Saudi) whether the companys income is subject to income tax or zakat,
or both. For that reason, ownership information must be furnished to the tax
authorities upon registration and with the annual income tax return or zakat
declaration. In order to meet these obligations, joint stock companies need
to be able to identify their shareholders at all times and bearer shares would
therefore not be issued, which is further ensured through the comprehensive checks on all joint stock companies by the Ministry of Commerce and
Industry as described in the previous paragraph. In addition, compliance
with these requirements is checked by DZIT through desk and field audits in
respect of all zakat and income tax payers and is further secured by penalties
that have been applied in practice.
100. Finally, it is noted that in respect of companies the shares of which
are traded on the stock exchange, section27 of the Capital Market Law
requires the registration of ownership records. According to the Saudi Arabian
authorities, this means that no bearer shares can be traded on the Saudi Stock
Exchange. As at July 2015, 171companies are traded on the Saudi Stock
Exchange.
101. It can be concluded that it is not possible for limited liability companies to issue bearer shares. Joint stock companies and partnerships limited
by shares may have a possibility to issue bearer shares under the Companies
Law, but registration of such entities would not be accepted in these

circumstances. In this situation MCI would not authorise the establishment
of the company, effectively blocking the establishment of such a company.
This would also be the case if MCI would see any indication of such shares
in practice, or would detect a joint stock company with bearer shares in practice, such action would be considered a violation of the Company Law which
stipulates the registration of ownership information at the initial offering
and at any later capital increases while the Company Law has no provision
to convert a nominal share to a bearer share. In addition, as noted above, this
possibility is negated by the obligation under tax and zakat law to identify
all owners and submit this information to the tax authorities with the annual
tax return or zakat declaration. It can therefore be concluded that the nonexistence of bearer shares is based on a comprehensive policy that is applied
through monitoring conducted by the Ministry of Commerce and Industry.
This regards both the authorisation of the establishment of the company, in
case of newly created joint stock companies, as well the annual shareholder
meetings where MCI verifies the completeness and the correctness of the register of shareholders of all the existing joint stock companies. Based on this
monitoring, the Saudi Arabian authorities have stated that no bearer shares
exist in practice.
Partnerships (ToRA.1.3)
102. In Saudi Arabia, partnerships are governed by the same law as companies, the CL, and the definition of the term company of section1 CL (see
above) also applies to partnerships. The CL sets out rules for the following
types of partnerships:

General partnership: an association of two or more persons who are

jointly and personally liable for the partnerships debts (s.16 CL).
Only natural persons may act as a general partner (Decision No.17,
20 Muharram 1402 (16November 1981)).As at 29April 2015, there
were4035general partnerships registered.
Limited partnership: this entity includes two types of partners.

General partners are personally liable for partnership debts to the full
extent of their personal assets, while limited partners are liable for
partnership debts to the extent of their investment in the partnership
(s.36 CL).As at 29April 2015, there were 1419limited partnerships
registered.
103. As is the case for companies, the number of registered partnerships

dropped considerably since 2012, with approximately 60%, due to the introduction of fees for registration with the Chamber of Commerce and its annual
renewal.
104. Establishing a partnership in Saudi Arabia occurs through entering

into a written partnership agreement and having it recorded with a public
notary (s.10 CL). Partnerships are separate legal entities and can do business and own property in their own name. All partnerships formed under
Saudi Arabian law are required to establish their head office in Saudi Arabia
(s.14CL).
105. The partnership agreement of general and limited partnerships would
contain detailed information about the partners. An abstract of the partnership agreement must be published in a daily newspaper which is distributed
near the location of the partnerships head office (s.21 CL). This abstract
must contain the following details (ss.22 and 39(2) CL):
a. the partnerships name, object, head office, and branches (if any);
b. the name, residence address, occupation and nationality of every
general partner;
c. the amount of the partnerships capital with sufficient details concerning the contribution each partner (including the limited partners)
has undertaken to make, and the date on which it becomes payable;
d. the names of the managers and the persons authorised to sign for the
partnership;
e. the date of formation of the partnership and its term; and
f.
the beginning and end of the partnerships financial year.
106. The abstract contains information on the identity of all general

partners and also refers to the contribution made by the limited partners
where there is a limited partnership. The identity of the limited partners is
not published, as this could be regarded as an act giving the impression that
the limited partner is in fact a general partner, making the limited partner
liable for all partnership debts (ss.37 and 38 CL). The identity of the limited
partners is available in the partnership agreement which is kept by the public
notary.

107. In addition to the publication of an abstract in a daily newspaper,
the complete partnership agreement and any amendment thereto, including
where a new partner enters the partnership or where a partner leaves the
partnership, is also recorded by the public notary (s.10 CL). As the partnership agreement contains details of both general and limited partners, this
means that full ownership information on all partnerships is available with
the public notary.

108. In addition to recording its partnership agreement with the public
notary, partnerships must also apply for registration in the Commercial
Register within thirty days of the date on which its partnership agreement
was recorded with the public notary (ss.21 and 39(2) CL and s.3 Commercial
Register Law (CRL)). The details to be registered are the same as for companies (see above) and include the name, place and date of birth, address
and nationality of each general partner in a (general or limited) partnership
(s.3CRL). A copy of the partnership agreement must also be provided. The
manager of the partnership shall apply for registration of any amendment to
the information already registered within thirty days of the occurrence of the
amendment (s.4CRL). Non-compliance with the registration requirements
can result in a fine of not more than SAR50000 (EUR12076) (s.15CRL).
109. As noted, partnerships are governed by the same law as companies,
the CL. The establishment and subsequent registering of a partnership is very
similar to the incorporation of a company. All relevant information in respect
of a partnership is stated in the partnership agreement that is reviewed by
the MCI before being authenticated by the public notary. The public notary
will only authenticate the agreement after it has certified that it has been
reviewed by the MCI. The MCI in its turn will not register a partnership in
the Commercial Register unless it has the authenticated partnership agreement. Any change of any of the partners involves the same procedure as a
transfer of shares in a LLC. This means that in case of a change of a partner
in a partnership, the following sequence takes place: submittal of partners
declaration of the partnership agreement amendment to MCI, followed by
authentication by the public notary and publication in a daily paper, and
completed with the amendment of the Commercial Register. As all information on the partnership, including information on the partners, is stated in
the partnership agreement that is referred by the MCI to the notary public,
it is ensured that all relevant information is available with both ministries as
well as Commercial Register at time of registration. The measures described
above to ensure compliance with registration, filing and payment requirements by companies apply to partnerships similarly.
Tax and zakat law

110. Even though partnerships are legally considered separate legal entities, for income tax purposes they are regarded as transparent and tax is
imposed on the partners. However, the partnership (if subject to tax) must
file a tax return showing all financial details of the partnership for the taxable year (s.36(a) ITL). In addition, the partners must also file a tax return
stating their income subject to tax from the partnership (s.17(2) Income Tax
Regulations).
111. All partnerships formed under Saudi Arabian law are registered
with the tax authorities. Partnerships with one or more foreign partners as
well as foreign partnerships carrying on business in Saudi Arabia through
a permanent establishment must register according to section57(a) of the
Income Tax Law (ITL). The registration form for partnerships is the same as
for companies (partnerships are often referred to as personal companies in
Saudi Arabia) and contains a sheet for filling out details on their shareholders
(= partners), including their names, addresses, the date on which the shares
were acquired and the ownership percentage. The tax authorities indicated
that they send out a form to all taxpayers at the start of every year requesting
them to submit any changes to the registered details. In addition, an income
tax return must be filed on an annual basis (s.60ITL), which includes an
attachment containing information on the partners. Non-compliance with the
timely filing of the complete annual income tax return can result in a penalty
of maximum SAR20000 (EUR4830) or between 5% and 25% of unpaid
tax (s.76ITL).
112. Partnerships that only have Saudi citizens as partners are not subject
to income tax (see also Introduction). However, these partnerships are subject
to zakat (s.2 Royal Decree on Zakat Regulations and s.1 Zakat Regulations).
This requires them to file an annual declaration to the tax authorities (s.8
Zakat Regulations). If not already registered, the tax authorities register the
partnership upon its first zakat declaration. The tax authorities confirmed
that the same details as for partnerships subject to income tax are registered,
and this information is updated annually following the same procedure as
for such partnerships including the annual submission of a zakat declaration.
113. Regarding supervision, Saudi Arabia explains that all measures
described above to ensure compliance with registration and filing requirements by companies also apply to partnerships.

114. Information on the partners in a Saudi Arabian partnership is available in the partnership agreement which has to be recorded by the public
notary. An abstract of the partnership agreement, including the names of the
general partners, must be published in a daily newspaper. In addition, details
of all partnerships formed under Saudi Arabias law or of foreign partnerships
carrying on business in Saudi Arabia through a permanent establishment
must be provided to the tax authorities upon registration.
115. Saudi Arabia did not receive any request related to ownership information of a partnership during the review period. Accordingly, no issue in
respect of availability of ownership information regarding partnerships was
reported by peers.
Trusts (ToRA.1.4)
116. In Saudi Arabia, the concept of trusts does not exist. However, there
is nothing in Saudi Arabias laws that would prevent a person from acting as
a trustee or trust administrator of a trust formed under foreign law.
Waqf
117. A fiduciary concept, similar to endowments, known as waqf exists.
A waqf is formed if one person, the waqif, brings assets under the control of
another person, in Saudi Arabia called a nadr. In general, waqf is seen as a
voluntary act of benevolence, which means that it cannot be established for the
benefit of rich people alone, and the waqifs wishes must be respected to the
letter unless they violate Islamic law. The concept of waqf is generally used
to provide public charitable services. These are directed to the use of a property or asset towards common good and benefit to the public at large, and the
vast majority of the waqfs falls into this category. It is also possible to form a
private waqf, which still must adhere to the general principle of benevolence.
118. A waqf is in principle also established forever. This means that the
assets in a waqf are often real estate or other assets with a certain level of perpetuity. The assets generally become inalienable and the proceeds are spent
for the benefit of the beneficiaries or, if no specific beneficiaries exist, for a
philanthropic purpose. The perpetuity of waqf means that the assets proceeds
fall either to the benefit of a string of beneficiaries or a (general) philanthropic
purpose. However, recipients can only be Saudi nationals and the proceeds of
the waqf are restricted to the geographical area (often the town or province)
where the waqf was established. Where the (string of) beneficiaries are no
longer alive, the revenues of the assets of the waqf will be allocated to a philanthropic purpose as close as possible to the initial purpose.11

119. For a waqf to be valid, the waqif needs to obtain a court order converting the assets from privately owned assets to assets under the waqf. A
court order will only be issued after the court has received and reviewed the
necessary documents, including the deed establishing the waqf which contains details of the nadr and, where identifiable, the beneficiaries. The waqf
has to appear in person before the court as part of the procedure of issuing of
the court order. Changes to the instrument pertaining to the waqf must also
be approved by a court. Saudi Arabia explains that the main regions have
specialised courts for these purposes since 2013.
11.
The general information on the concept of waqf is mainly taken from http://
monzer.kahf.com/papers/english/WAQF_A_QUICK_OVERVIEW.pdf.
120. After receiving a court order validating the waqf or validating changes
to the waqf instrument, every waqf is required to register with the Waqf
Administration belonging to the Ministry of Islamic Affairs and Waqf (s.9 Waqf
Regulations). The Waqf by-law provides that a copy of each waqf deed is to be
provided by the concerned court to Ministry of Islamic Affairs. For this purpose
the court will issue a specific certificate (the waqf deed) that states that the
court validates the waqf or the changes to the waqf instrument. As at November
2015, there were 8570 waqfs registered. These waqfs are public waqfs or they
become public after the decease of beneficiaries. The Waqf Administration has
local offices administering or supervising all waqfs. In respect of public charitable waqfs the Waqf Administration keeps a copy of the waqf deed identifying
the waqif, the endowed property or asset and the purpose of the waqf. Public
charitable waqfs are directly managed by the Waqf Administration in the town
where the assets are located (s.2 Waqf Regulations).
121. In practice, the court will provide a copy of the waqf deed to the local
office. The waqf Administration registers this information in its electronic
database. A full copy of all relevant information is also available on the
central level. Saudi Arabia further explains that this database will be further
linked to the central database in the near future. Field inspections may take
place by the waqf Administration to ensure compliance and keep oversight.
Saudi Arabia further explains that major investments have to be approved
separately by the High Waqf Council.
122. The Waqf Administration also supervises private waqfs. For that
purpose, the Waqf Administration keeps a copy of the waqf deed of private waqfs as well, and keeps a file identifying the waqif, the nadr, the
endowed property or assets and the beneficiaries (s.7 Waqf Regulations). If
there are no more surviving beneficiaries or upon approval of the nadr or a
court, the administration of a private waqf falls into the hands of the Waqf
Administration and its proceeds will be allocated to a public purpose (s.4
Waqf Regulations). Of the approximately 8500 waqfs registered in Saudi
Arabia only about 1% are managed by private individuals (nadr) and all
others are directly managed by the Waqf Administration. As Saudi Arabia
explains purely private waqfs are overseen by the Ministry of Social Affairs.
For this purpose representatives of the Ministry attend the meetings of the
Waqf board that administers this type of waqfs.
Tax and zakat law

123. Waqfs are only subject to zakat where they are engaged in any type
of commercial activity and where persons who are Saudi citizens are beneficiaries of the waqf. As the annual zakat declarations require ownership
information to be submitted, information on the beneficiaries should be available with the tax authorities in these cases. Currently, ten waqfs are registered

with the tax authorities (all private waqfs). Regarding oversight and compliance with annual zakat declarations reference can be made to the sections
regarding companies above.
Foreign trusts
124. Any person providing trust services, which would include a trustee
or a trust administrator of a foreign trust, is subject to the requirements under
the AMLL (Regulation 1-2 AMLL). This means that the identity of their
clients must be verified (s.5 AMLL).No specific requirements on which
information must be obtained if the client is a trust are provided for. However,
the AML/CFT Guidelines for banks and money exchangers provides that
where the client is a trustee, the bank must determine the provider of the
funds (settlor), those who have control over the funds (trustees) and the persons who have the power to remove the trustee (paragraph4.5.7 AML/CFT
Guidelines for banks and money exchangers). This implies that where the
trustee itself is the person who must perform customer due diligence, such
information is the minimum that he would have to obtain. However, such
information does not include information on the identity of the beneficiaries.
125. Documentation in respect of the customer due diligence carried out
must be kept by the service provider for at least ten years after completing
the transaction (s.6 AMLL). Failure to carry out customer due diligence
or to keep the documentation for at least ten years can lead to imprisonment for a period not exceeding two years and (or) a fine not exceeding
SAR500000(EUR120765) (s.20 AMLL). As noted above under the item
Nominee identity information. AML-related supervision on company service providers including accountants is exercised by Ministry of Commerce
and Industry as well as the Ministry of Justice in respect of lawyers.

126. All waqfs in Saudi Arabia are registered with the Waqf Administration,
which is part of the Ministry of Islamic Affairs. Public charitable waqfs,
which do not have identified persons as beneficiaries, are managed by the
Waqf Administration directly. Information kept by the Waqf Administration
includes a copy of the waqf deed identifying the waqif, the endowed property or asset and the purpose of the waqf. The waqf Administration registers
this information in its electronic database. Field inspections may take place
by waqf Administration to ensure compliance and to keep oversight.
Saudi Arabia further explains that major investments have to be approved
separately by the High Waqf Council. In respect of private waqfs, the Waqf
Administration maintains a file identifying the waqif, the nadr, the endowed
property or assets and the beneficiaries. As Saudi Arabia explains purely
private waqfs are overseen by the Ministry of Social Affairs. For this purpose representatives of the Ministry attend the meetings of the Waqf board
that administers this type of waqfs. This combination of legal requirements
and oversight ensures the availability of identity information on all waqfs in
Saudi Arabia.
127. Saudi Arabian trustees of foreign trusts are subject to requirements to
identify their client (which is typically the trust and/or the settlor and/or the
beneficiaries) under the AML/CFT legislation. However, no clear guidance is
provided on what information must be obtained by the trustee to satisfy these
requirements. It is therefore recommended that Saudi Arabia ensures that
ownership information on foreign trusts with a trustee or trust administrator
in Saudi Arabia is available in all cases.
Foundations (ToRA.1.5)
128. Foundations exist in Saudi Arabia to the extent that it is possible to
form a legal entity to which assets are transferred by the founder(s), which are
then held for the benefit of a particular purpose. Such entities are referred to
as philanthropic associations. However, it is only possible to form such entities for charitable purposes (ss.3 and 4 of the Implementing Regulations of
By-Law of Philanthropic Associations and Organisations), and therefore they
are of limited pertinence to the exchange of information for tax purposes. The
Ministry of Social Affairs issues licenses to ensure the foundation operation
is in line with the foundations purposes and objectives. The Ministry of
Social Affairs has the jurisdiction to monitor the performance of foundations
including its assets (could be waqfs) consecrated in full or in part for these
foundations. As at 29April 2015, there were 666 philanthropic associations
registered in Saudi Arabia with the Ministry of Social Affairs, which is
responsible for regulating and overseeing their operations. Saudi Arabian
authorities stated that for supervision purposes, the Ministry of Social Affairs
has available up-to-date information on the members of the associations as
well as on the members of the governing body.
Enforcement provisions to ensure availability of information

(ToRA.1.6)
129. Jurisdictions should have in place effective enforcement provisions
to ensure the availability of ownership and identity information, one possibility among others being sufficiently strong compulsory powers to access the
information. This subsection of the report assesses whether the provisions
requiring the availability of information with the public authorities or within
the entities reviewed in sectionA.1 are enforceable and failures are punishable. Questions linked to access are dealt with in PartB.
Companies and partnerships

130. Companies are required to keep a shareholder register, which must
record all share transfers (except for bearer shares) for them to take effect.
Any official from a company who fails to observe this obligation is liable
to imprisonment for a period of at least three months but not more than one
year and to a fine of at least SAR5000 (EUR1208) but not more than
SAR20000 (EUR4830), or both (s.229(8) CL).
131. Ownership information on limited liability companies is also included
in its articles of association, which must be recorded in the presence of a
public notary and registered in the Commercial Register. Amendments to the
articles of association must be registered in the Commercial Register within
thirty days of the occurrence of the amendment. Non-compliance with the registration requirements (which includes registering any amendments) can result
in a fine of not more than SAR50000 (EUR12076) (s.15CRL).
132. As noted above, the articles of association of a limited liability company, which contain full ownership information, are registered with the MCI
upon incorporation. Subsequently, any transfer of shares of a limited liability
company is based on a sale and purchase agreement and involves an amendment of the articles of association. This amendment can only be made after
approval of the Ministry of Commerce and Industry and the execution before
the Notary. As the transfer becomes legally effective after the completion
of the procedure this ensures that full ownership information in respect of
limited liability companies is available with the MCI, and there has not been
a need to impose any penalties.
133. As noted above, with regard to joint stock companies, the shareholder
register is verified annually by a representative from the MCI that is present
during the annual shareholder meeting. In respect of listed joint stock companies the Capital Market Authority (CMA) up-dates the register daily. Updates
are electronically registered in the Depository and Settlement System in the
Securities Depository Centre at the Saudi Stock Exchange. The procedure
applied when verifying includes a review of the shareholder register kept by
the company (in case of closed stock companies) and by TADAWAL (in case
of listed companies). Further to this identity cards of the present shareholders are checked to ensure that they are the ones in the register. Regarding the
obligation to keep a shareholder register, it can be noted that any official from
a company who fails to observe the obligation to keep a shareholder register
is liable to imprisonment for a period of at least three months, but not more
than one year, and to a fine of at least SAR5000 (EUR1207009) but not
more than SAR20000 (EUR4830037), or both (s.229(8) CL). Regarding
this obligation to keep the shareholders register, Saudi Arabia reports that
there were no cases of non-compliance and therefore no penalties had been
imposed during the period under review.
134. Full ownership information in respect of partnerships must be

provided at the time of registration in the Commercial Register and any
amendments must be registered within thirty days. Non-compliance with the
registration requirements can result in a fine of not more than SAR50000
(EUR12076) (s.15CRL).
135. As noted, partnerships are governed by the same law as companies,
the CL. The establishment and subsequent registering of a partnership is very
similar to the incorporation of a company. Regarding supervision and oversight, all measures that are relevant to ensure compliance with registration
and filing requirements by companies also apply to partnerships. Ownership
information is directly available with the MCI, and there has not been a need
to impose any penalties.
Waqfs
136. All waqfs in Saudi Arabia are registered with the Waqf Administration
and are either directly managed or supervised by the Waqf Administration,
which ensures that the Waqf Administration has full identity information
on all waqfs. As noted, the court will provide a copy of the waqf deed to the
local office of the waqf Administration. This includes full identity information regarding the founder and the beneficiaries of the waqf, the waqf
Administration will also include this information in its electronic database. A
full copy of all relevant information is therefore also available on the central
level. In relation to trustees and trust administrators of foreign trusts subject
to AMLL, a failure to identify their client (which may contain identifying the
settlors and/or beneficiaries) can lead to imprisonment for a period not exceeding two years and (or) a fine not exceeding SAR500000(EUR120076) (s.20
AMLL). AML-related supervision on company service providers, including accountants, is exercised by the Ministry of Commerce and Industry.
Supervision of lawyers is in the hands of the follow-up administration of the
Ministry of Justice. Reference can be made to the section regarding AML
supervision of service providers that is included in paragraph86 above.
Registration with DZIT and filing of the annual tax or zakat return
137. Ownership information must also be provided to the tax authorities upon registration and upon filing the annual tax or zakat return. This
applies to all entities and arrangements subject to income tax or zakat, which
includes all companies (including foreign companies effectively managed
from Saudi Arabia) and partnerships. In respect of persons subject to income
tax, a fine not less than SAR1000 (EUR242) and not exceeding SAR10000
(EUR2416) shall be imposed for failure to register (s.57(c) ITL), while noncompliance with the timely filing of the complete annual income tax return

can result in a penalty of maximum SAR20000 (EUR4831) or between 5%
and 25% of unpaid tax (s.76 ITL).While there are no monetary penalties for
failure to register as a zakat payer or for failure to file the annual zakat declaration, which comprises all entities with no foreign participation, this will
result in the denial by the tax authorities to issue a zakat certificate. The zakat
certificate is issued annually to certify that a person has complied with its
duties to pay zakat, and is required for a person to bid for contracts and obtain
licenses to do business. As explained in the sections above it is very difficult
- if not impossible - for a company or business to (commercially) operate in
Saudi Arabia without a valid zakat certificate or tax clearance certificate.
138. Compliance with all tax and zakat requirements is checked by DZIT
through desk and field audits and requirements to register with DZIT are
further secured by registration and filing penalties that have been applied
in practice as demonstrated in the statistic included in paragraphs78 to
80 above. Foreign companies need to obtain a license from SAGIA. At the
same time DZIT will allocate a TIN to the foreign company. SAGIA carries out field inspections to ensure compliance by foreign investors with the
license conditions and other relevant legal provisions. In addition, and as
noted above, DZIT performs cross checks and matches payments reported
by audited taxpayers to recipients who should be identifiable in DZITs
databases; in case it is found out that payments are made to persons not
registered, DZIT takes action to ensure that such persons get registered and
comply with their obligations.
139. Compliance with all tax and zakat requirements is checked by DZIT
through desk and field audits. The correctness of ownership information is
being checked during these audits. As Saudi Arabia explains that the inspection the shareholder register is part of DZIT standard operating procedure for
conducting desk and field audits in order to verify the shares that are subject
to either tax or zakat. In this respect DZIT reports that around 25% of all
persons subject to zakat and income tax get audited on annual basis. As DZIT
further explains the goal is to have 100% of the zakat and tax payers audited
within a cycle of four years, either through a field or a desk audit. Field audits
comprise to around 10% of all audits conducted in a year. From the 1648
officials working with DZIT around 80% are qualified to conduct audits in
respect of zakat and/or tax purposes.
Conclusion regarding availability of information

140. Relevant information in respect of joint stock companies is kept by
the company or by the Capital Market Authority (CMA) for companies that
are listed. The MCI verifies the completeness and the correctness of the
register of shareholders of all the joint stock companies on an annual basis.
The CMA updates the register of shareholders of listed joint stock companies
on a daily basis. Updates are electronically registered in the Depository and

Settlement System in the Securities Depository Centre at the Saudi Stock
Exchange. These measures are adequately applied in practice to ensure that
this information is available. Furthermore, ownership information in respect
of limited liability companies is kept by the MCI and the Ministry of Justice
(public notary). The establishment of an LLC or a transfer of shares requires
an amendment of the articles of association, and this can only be done after
approval of the MCI and the execution before a public notary. As the transfer
becomes legally effective only after the completion of the procedure, this
ensures that ownership information in respect of limited liability companies
is available with the MCI and the Ministry of Justice.
141. Regarding availability of ownership information of partnerships
supervisory measures to ensure compliance with registration and filing
requirements by companies also apply to partnerships. This ensures that
ownership information in respect of partnerships is available with the MCI
and the Ministry of Justice.
142. All waqfs in Saudi Arabia are registered with the Waqf Administration,
which is part of the Ministry of Islamic Affairs. Relevant ownership information is kept by the Waqf Administration. The waqf Administration registers
this information in its electronic database. The Waqf Administration uses field
inspections to ensure compliance and to keep oversight. Purely private waqfs
are overseen by the Ministry of Social Affairs. For this purpose representatives of the Ministry attend the meetings of the Waqf board that administers
this type of waqfs. This combination of legal requirements and oversight
ensures the availability of identity information on all waqfs in Saudi Arabia.
143. Enforcement provisions are in place in respect of the relevant obligations to maintain ownership and identity information for all relevant entities
and arrangements. Enforcement provisions are adequately applied in practice
and generally ensure that ownership information with regard to the relevant
entities is available.
Determination and factors underlying recommendations
Determination
The element is in place.
Factors underlying recommendations
Although a general obligation exists for
trustees and trust administrators of foreign
trusts to identify their client under AML/CFT
legislation, no clear guidance is provided on
what information needs to be obtained.
Recommendations
Saudi Arabia should ensure that ownership
information on foreign trusts with a trustee
or trust administrator in Saudi Arabia is
available in all cases.

Phase2 rating
Compliant
A.2. Accounting records

Jurisdictions should ensure that reliable accounting records are kept for all
relevant entities and arrangements.
144. A condition for exchange of information for tax purposes to be effective is that reliable information, foreseeably relevant to the tax requirements of a
requesting jurisdiction, is available, or can be made available, in a timely manner.
This requires clear rules regarding the maintenance of accounting records.
General requirements (ToRA.2.1)

145. Joint stock companies and partnerships limited by shares must make
an inventory of the value of the companys assets and liabilities at the end of
every financial year, as well as preparing a balance sheet, a profit and loss
statement, a report on their operations and financial position for that financial
year and the proposed method for allocation of the net profits (ss.123 and
155 CL). Their accounts must also be audited and the auditor must submit
its report to the annual general shareholders meeting (ss.129-133 CL). In
addition, copies of the balance sheet, the profit and loss statement, the directors report and the auditors report must be submitted to the Commercial
Register and the Register of Companies (s.128 CL). Both the Commercial
Register and the Register of Companies are administered by the Ministry of
Commerce and Industry.
146. Similar to joint stock companies and partnerships limited by shares,
limited liability companies must prepare a balance sheet, a profit and loss
statement, a report on the operations and financial position of the company
and a proposal on the appropriation of net profits within four months of the
end of each financial year (s.175 CL). Its accounts must then be audited as
well (s.169 CL). In addition, copies of the documentation prepared by the
company, including a copy of the auditors report, must be submitted to the
Register of Companies (s.175 CL).
147. With respect to general and limited partnerships, the profits or losses
and the share of every partner therein shall be determined at the end of the
partnerships financial year on the basis of the balance sheet and the profit and
loss statement (ss.26 and 39(3) CL). Also, all partners have a right to examine
the partnerships books and records, and extract therefrom a summary statement on the financial position of the partnership (ss.24 and 39(3) CL).
148. The following persons are liable to imprisonment for a period of

at least three months but not more than one year and to a fine of at least
SAR5000 (EUR1207) but not more than SAR20000 (EUR4830), or both
(s.229(6and 8) CL):

Any manager, director, auditor or liquidator of a company or partnership who knowingly includes false information in the balance sheet
or profit and loss statement, or in the related reports, or who omits
facts from such reports with the intention of concealing the financial
position of the company or partnership.
Any official from a company or partnership who fails to observe the

mandatory rules issued under the CL. The rules on keeping accounting records are mandatory.
149. It follows from the obligations described above that accounting

records must be kept by companies and partnerships that (i)correctly explain
all transactions through the profit and loss statement, (ii)enable the financial position to be determined with reasonable accuracy through the balance
sheet and (iii)allow financial statements to be prepared using the previously
mentioned information.
150. In respect of waqfs, it is the Waqf Administration, part of the Ministry
of Islamic Affairs, which administers almost all waqfs directly and therefore
keeps all relevant data. This includes information on the type of property
endowed, the location and size of the property endowed, the type of investment made as well as the propertys yield, and endowment identification
documents (sections5 to 9 Waqf Regulations and sections3(9) and 6(5)
Waqf Supreme Council System). Similar information is kept by the Waqf
Administration regarding private waqfs, which are administered by another
person, in order for the Waqf Administration to carry out its task as supervisor of these private waqfs (s.4 Waqf Regulations).
151. The Saudi Arabian authorities indicate that the Public Auditing Bureau
performs an annual audit of the accounts of the waqfs administered by the
Waqf Administration.
Commercial books
152. Under the Commercial Books Law (CBL) merchants are required
to keep the commercial books required by the nature and importance of his
trade in a way that shows his exact financial status and the rights and obligations pertaining to his trade. In addition, the merchant shall at least keep an
original journal, an inventory book and a general ledger (s.1 CBL).More specific requirements are that all financial transactions shall be recorded, and a
copy of the annual statement regarding the financial position of the merchant

shall be kept (ss.3 and 4 CBL). A person who fails to comply with the recordkeeping requirements is liable to a fine of at least SAR5000 (EUR1207)
but not more than SAR20000 (EUR4830) (s.12CBL).
153. The term merchant is not defined in the CBL, but the term merchant
is defined in section1 of the Law of Commercial Court as a person engaged
in commercial transactions and making such engagement his profession. The
Saudi Arabian authorities confirmed that this definition also applies to the
CBL and includes all companies and partnerships, since these are defined as
a contract under which two or more persons undertake to participate in an
enterprise together [] (s.1 CL).
154. Any merchant whose capital does not exceed SAR100000
(EUR24159) is exempt from keeping books and records under the CBL (s.1
CBL). The different kinds of companies are not affected by this rule, as they
must have a minimum capital ranging from SAR500000 (EUR100939) in
the case of limited liability companies to SAR10million (EUR2million)
for joint stock companies with shares offered to the public (ss.49, 150 and
158 CL). Smaller partnerships are covered by the exemption. In practice this
mainly concerns 4035 businesses that are organised in the form of general
partnerships. However, although exempt from book keeping, record keeping
requirements for these smaller partnerships still apply, as it is noted that all
partnerships are subject to the record-keeping obligations of the CL.
Tax and zakat law obligations

155. Section58(a) ITL requires taxpayers (other than non-residents with
no permanent establishment in Saudi Arabia) to maintain the necessary commercial books and accounting records for precise determination of the tax
payable by it. This requirement is further explained as an obligation to keep
at a minimum the general journal, ledger, inventory book and other accounting records as may be necessary to accurately determine tax liability (s.56(1)
ITL Regulations). It is also stated that taxpayers must comply with the CBL
as well (s.56(1) ITL Regulations). A failure to keep accurate accounting
records may lead to a fine of 25% of the tax unpaid as a result of such failure
(s.77(b)(1-3 and 5) ITL). In this regard Saudi Arabia reports that during the
period under review in 487cases penalties have been imposed on companies
and partnerships for income tax purposes. However, these penalties include
a variety of issues, including for failing to keep accounting records and late
registration and late filing. Saudi Arabia reports that 95.1% of all of companies and partnerships keep books and record as part of their accounting
obligations. For these companies and partnerships that are included in the
percent of 95.1%, the monthly average number of cases not complying with
accounting obligations, based on actual supervision and checks, is 1-2cases.
156. The concept of taxpayer under the ITL is limited and does not include
companies and partnerships with no foreign shareholders or partners (ss.1
and 2 ITL). The obligation to keep accounting records under ITL therefore
only applies to a limited number of entities.
157. Companies and partnerships with Saudi citizens as shareholders or
partners, as well as waqfs which have identified persons as beneficiaries, are
subject to the Zakat Regulations (ZR). This means that they are required to
keep organised books that show capital, receipts and expenditure relevant
to their activity for each year (s.6 ZR). This obligation should ensure that
accounting records are held that correctly explain all transactions (receipts
and expenditure) and enables the entities financial position to be determined with reasonable accuracy (capital). This information should then
allow financial statements to be prepared. No penalties apply for not keeping
accounting records under s.6 ZR. However, it can be noted that DZIT will
not issue a new Zakat certificate if the person or company involved has not
met all relevant requirements.
158. An obligation to keep certain accounting records also applies to
all residents in Saudi Arabia who make payments to a non-resident from
a source in Saudi Arabia that are subject to withholding tax (s.68(a) ITL).
All payments for services provided are subject to withholding tax, as well
as dividends, loan charges (interest) and royalties (s.63 ITL Regulations).
The records to be held are the records relevant to prove compliance with the
withholding tax provisions, and shall at least include the name and address of
the recipient, the type and amount of the payment and the amount withheld
(s.68(b)(4) ITL and s.63(9)(c) ITL Regulations).
159. Another source for the tax authorities to obtain certain accounting
information lies in the obligation for all persons (not only taxpayers) and government bodies to provide them with information on contracts concluded with
the private sector within three months of the date of conclusion of the contract
(s.61(c) ITL). The Saudi Arabian authorities indicate that the private sector
includes all individuals, entities and arrangements that conduct business in
Saudi Arabia. The information shall include the names and addresses of the
parties, the subject of the contract, its value and financial terms and the execution and completion dates. Section58 ITL Regulations further clarifies that
the obligation applies with respect to construction, service and delivery contracts with a value of at least SAR100000 (EUR24159). The tax authorities
also have the right to request a copy of the contract. Any person responsible
for notifying the tax authorities who fails to comply with such obligation shall
be jointly liable with the taxpayer for the tax due on the contract and for any
tax penalties resulting therefrom (s.58(2) ITL Regulations). Saudi Arabia
explains that DZIT makes sure that all contractors are registered. This information is further supplemented with data regarding imports that the Customs

Department gathers and reports to DZIT via a direct link. In addition, the
Ministry of Commerce and Industry provides DZIT directly with Commercial
Register Data, as well as industrial and professional licenses and their updates. DZIT in its turn performs cross checks and matches payments reported
by audited taxpayers to recipients who should be identifiable in DZITs databases; in case it is found out that payments are made to persons not registered
or non-compliant, DZIT takes action to ensure that such persons get registered
and comply with their obligations.
Underlying documentation (ToRA.2.2)

160. The CL does not expressly state that underlying documentation must
be kept by companies and partnerships. The accounts of all companies do
have to be audited. However, an express obligation to keep underlying documentation is included in the CBL. Section6 CBL reads as follows:
The merchant shall keep an exact copy of all correspondence and
documents relating to his trade, issued or received by him, and
[this] shall be kept in a regular way that facilitates review of the
accounting entries and ensures, where necessary, ascertainment
of profits and losses.
161. A person who fails to comply with the record-keeping requirements
is liable to a fine of at least SAR5000 (EUR1207) but not more than
SAR20000 (EUR4830) (s.12 CBL). As explained under sectionA.2.1 the
obligations of the CBL apply to all companies and to partnerships with a capital of more than SAR100000 (EUR24159). These entities are also subject to
the obligations under the CL, which requires them to keep accounting records
generally. The Saudi Arabian authorities indicate that this includes the keeping
of underlying documentation, even though this is not expressly stated.
162. Saudi Arabian authorities confirmed that the Waqf Administration
follows the same principle as included in the CBL in keeping accounting
records with respect to the waqfs managed and supervised by them.
163. Persons subject to income tax, which is only a limited group of
persons (companies and partnerships with foreign shareholders or partners,
are also expressly required to keep supporting documents and explanatory
data and remarks (s.56(1) ITL Regulations). A failure to keep accurate
accounting records (including underlying documentation) may lead to a fine
of 25% of the tax unpaid as a result of such failure (s.77(b)(1-3 and 5) ITL).
Furthermore, explicit reference is made to the CBL and the fact that all taxpayers must comply with the obligations contained in that law as well.
164. Whether or not otherwise caught by an obligation to keep underlying
documentation, any person must keep contracts concluded with the private sector
with a value of at least SAR100000 (EUR24159), as it is required to furnish

information on such contracts to the tax authorities and a copy should be available for the tax authorities at all times (s.61(c) ITL and s.58 ITL Regulations).
5-year retention standard (ToRA.2.3)

165. Under section8 CBL, all merchants must keep the accounting
records, including underlying documentation, for a period of at least ten years.
This obligation also applies to taxpayers subject to income tax (s.56(1) ITL
Regulations). The documentation on contracts concluded with the private sector
must also be kept for a period of at least ten years (s.63(9)(c) ITL Regulations).
166. The obligation to keep accounting records, including underlying
documentation, for a period of at least ten years applies to the same persons
as the obligation to keep underlying documentation, which excludes partnerships with a capital of less than SAR100000 (EUR24159). As noted, this
mainly concerns general partnerships. However, section12 of the Certified
Public Accountants Law requires that all public accountants maintain documents received from clients, audit working papers and copies of financial
statements pertaining to his clients for a minimum period of ten years. This
means that if partnerships have their accounts audited, this information,
which is understood not to include the full accounting records of these partnerships, will be available in Saudi Arabia.
167. In respect of waqfs, accounting records, including underlying documentation, are kept indefinitely by the Waqf Administration according to the
Saudi Arabian authorities.
Conclusions on A.2 and practice

168. All companies and partnerships must keep general accounting
records under both the Companies Law and the Commercial Books Law. In
respect of waqfs, accounting information, including underlying documentation, is kept by the Waqf Administration.
169. Obligations to keep underlying documentation and to keep accounting records for a period of at least ten years are only provided for under the
Commercial Books Law and the Income Tax Law. These pieces of legislation do not apply to partnerships with a capital of less than SAR100000
(EUR24159), unless these partnerships have foreign partners. It is therefore
recommended that Saudi Arabia ensures that all partnerships are required to
keep underlying documentation and to keep accounting records for a period
of at least five years.
170. As noted, joint stock companies, limited liability companies and
partnerships limited by shares are subject to a statutory audit, and they are

required to prepare an annual report, including the auditors report and the
financial statements. Because of this statutory obligation, these entities and
arrangements must have their accounts audited.12
171. Oversight on the performance of auditing activity takes place by the
Saudi Organisation for Certified Public Accountants (SOCPA13). SOCPA oversees accountants and auditors, both with respect to their AML obligations, as well
as the quality of the review. All auditors are subject to independent monitoring
and review through desk audits and on-site inspections by SOCPA, as can be
demonstrated by the following statistics that have been provided by Saudi Arabia:
Number of desk and onsite inspections conducted by SOCPA in respect of certified
accountants regarding AML/CFT obligations, as well as the quality of the review
Year
No. of offices subject to

sudden visitsa
No. of offices subject to

periodical field reviewsb
No. of offices that filed their

annual information and were
subject to desk-reviewc
2012
21
126
2013
14
32
129
2014
38
23
124
Notes: a. This programme started in 2013. According to information available at its website www.
socpa.org.sa as of August 2015, SOCPA in total has approximately 5000members, divided
over 147 offices.

b. Normally an office is reviewed once every 4years.
c. An office that fails to file this information is automatically referred to the SOCPA Investigation
Committee.
172. During the inspections the adherence to accounting and (international) auditing standards is assessed, as well as the competence of the
individual auditors. During an onsite inspections specialised review groups
review samples of audit files (performed by the office under review) to assure
compliance with laws and professional standards, and with the approved
quality control standards for accounting offices and their elements such
as independence. Both procedural aspects and the quality of the work and
12.
13.
It can be noted that the requirement to be audited is not dependent on whether the
company is active or inactive.
SOCPA was formed by Royal Decree. It is an independent legal entity managed
by a board of directors chaired by Minister of Commerce and Industry, with
members from government agencies, private and academic sectors. As Saudi
Arabia explains SOCPA basically oversees the certified public accountants performance. MCI is the competent authority to monitor compliance with keeping
accounting records requirements.
independence are reviewed. In case of minor remarks, the concerned office

is addressed to correct the problem. In case of non-compliance, as would for
instance be the case if a public accountant provides both auditing services as
well as consultation services to the same customer or in cases where relevant
work papers or records are absent or insufficiently kept, the case is referred
to SOCPAs Investigation Committee (concerned with non-compliance with
the provisions of Public Accountants Regulations). Disciplinary measures
and other sanctions have been taken as a result of the reviews. Saudi Arabia
reports that this includes reprimand, warning, temporary closure, cancellation of license, imprisonment and financial fines.
173. Compliance with the requirement to maintain accounting records
and underlying documentation by all legal entities is monitored also by the
MCI, as well as the Capital Market Authority in respect of listed joint stock
companies. Until 1January 2015 all companies had to submit their accounting records manually to MCI. This included the auditors report. Within
MCI records were checked by a team of 5 persons. Saudi Arabia explains
that compliance with a timely submission during the period up to 2014 was
relatively low and only around 50%.
174. In response Saudi Arabia has taken a number steps to improve this
situation. First, as of 2012, MCI has stopped the renewal of the companies
registration in the Commercial Registry if the company failed to submit their
financial accounts to MCI. Second, an extra 100staff were hired in the course
of 2015. Third, as of 1January 2015 a new automated system that is known as
Qawaem became mandatory to use for all companies. It enables companies and
audit firms to upload and send their financial statements in a standard XBRL
language. Alerts are sent out automatically if the records are not submitted
within 6months after the fiscal year. Saudi Arabia reports that a renewal of
registration with the Commercial Registry is not done in cases of non-filing
or non-timely filing of the financial statements and other relevant documents.
175. Although it seems likely that all these steps that were initiated by
MCI will significantly improve the issue of late or non-filing of audited
accounting records with MCI, it should be noted that most of these improvements still had to be implemented at the end of the three year review period.
176. However, MCI should monitor whether all relevant entities actually meet their obligation to have their accounts audited, as the auditors and
SOCPA can only ensure that reliable accounting records are kept by companies that actually meet this requirement. As noted, as of April 2015 there
were 1098JSCs and 37709 LLCs registered in the Companies Register.
177. With a staff of only 5 persons and with only half of the audited
accounting documents being submitted in a timely way, it is highly unlikely
that MCIs monitoring was sufficient to ensure that reliable accounting

records were kept in practice for all relevant entities and arrangements that
were not within the scope of the auditors and SOCPA.
178. Nevertheless, the tax administration audits a percentage of filed
returns every year, and the audited item(s) is (are) traced back to the taxpayers books and records. In cases where DZIT has reason to doubt the
validity and soundness of the books and records presented, it may not accept
such books and records and make a presumptive assessment in certain cases
and based on the taxpayers relevant facts and circumstances. In practice this
procedure may also be used by the Department in order to enforce taxpayers
compliance with statutory requirements. Saudi Arabia reports that in total
4108 taxpayers and 10052zakat payers were audited by DZIT in the course
of field audits during the last three years.
179. However, with around 40000Joint Stock Companies and LLCs
registered in the Companies Register and only around 25000companies
registered with DZIT as taxpayers or zakat payers14, it is clear that in practice
there is quite a significant number of companies (around 30%) that is not
registered with DZIT. Therefore, the oversight that takes place by the tax
authorities is only likely to cover part of the relevant entities and arrangements that should be monitored by the MCI.
180. Although it can be noted that MCI already initiated some important steps
with the introduction of Qawaem and the hiring of an additional 100staff, it is
recommended that Saudi Arabia should improve its monitoring to ensure that
reliable accounting records are kept for all relevant entities and arrangements.
181. In respect of waqfs Saudi Arabian authorities report that the Public
Auditing Bureau performs an annual audit of the accounts of the waqfs
administered by the waqf Administration. Field inspections, which include
verification of the accounting records, may take place by waqf Administration
to ensure compliance and to keep oversight.
182. In practice, Saudi Arabia reports that it went to the tax payer to obtain
accounting information. Saudi Arabia received a limited number of requests for
accounting information. However, none of these requests were answered at the
time of the onsite visit. However, as will be further elaborated below within the
context of elementB.1.3 and C.5, this does not seem to be related to the availability of accounting information, but rather to limitations based on the interpretation
of its treaties as well as the organisation of the competent authority.15
14.
15.
In total 6864companies are registered as taxpayers and 19990companies are

registered as zakat payers with DZIT.
As noted in para 302 Saudi Arabia reports that after inspecting the Saudi taxpayer involved, it obtained the data requested (involving accounting information)
and responded in an (second) e-mail on November 29, 2015.

Determination
Recommendations
Partnerships with a capital of SAR100000

(EUR24159) or less without foreign
partners are not expressly required to
keep underlying documentation or to keep
documentation for at least 5years.
Saudi Arabia should ensure that all

partnerships are required to keep underlying
documentation and to keep accounting
records for a period of at least 5years.
Phase2 rating
Largely compliant.
Recommendations
With a staff of only 5 persons and with only

half of the audited accounting documents
being submitted to the MCI in a timely way
during the period under review, there were not
sufficient safeguards in place to ensure that
reliable accounting records in practice were
kept for all relevant entities and arrangements.
Furthermore, it appears that a significant
number of companies in Saudi Arabia is not
registered with DZIT, although Saudi Arabia
indicated that the vast majority of these are
inactive. Therefore, the oversight that takes
place by the tax authorities in this respect is
only likely to cover part of the relevant entities
and arrangements that should be monitored
by the MCI. It can be noted, however, that MCI
already initiated a number of important steps
to enhance its oversight activities, including
the hiring of an additional 100staff as well as
the recent introduction of a specific database
known as Qawaem, to reduce the number of
late filings or non-filings.
Saudi Arabia should monitor the recently

introduced oversight activities to ensure that
reliable accounting records are kept for all
relevant entities and arrangements.
A.3. Banking information

Banking information should be available for all account-holders.
183. No person is allowed to engage in banking business in Saudi Arabia

unless it holds a valid license for that purpose issued by the Ministry of
Finance on a recommendation from the Saudi Arabian Monetary Agency
(ss.2 and 3 Banking Control Law). The Saudi Arabian Monetary Agency
(SAMA) is the regulatory and supervisory body for the banking industry. As
at December 2014, a total of 24 banks (12 domestic banks and 12 branches of
foreign banks) operate in Saudi Arabia.
Record-keeping requirements (ToRA.3.1)

184. Banks must produce all required books and records of accounts and
other documents when an inspection is conducted by SAMA or auditors
appointed by SAMA (s.18 Banking Control Law). This would include all
records that a bank, as a business entity, is required to keep under the CBL
and the CL (see A.2), but also the records that must be kept under AML legislation, as explained below.
185. Under section1(5) AMLL in conjunction with Regulation 1-2 AMLL
banks are regarded as financial institutions and they must therefore carry
out customer due diligence and keep, for a period of at least ten years after a
transaction or the closing of an account, all records and documents to show
the financial dealings, commercial and cash transactions, account files, business correspondence and copies of personal identification documents of their
clients (ss.5 and 6 AMLL).
186. Paragraph4.10 of the AML/CFT Guidelines for banks and money
exchangers specifically state that the records that are kept should be adequate
enough to be able to reconstruct a transaction and offer a complete audit
trail of all financial transactions, in particular cash transactions and funds
transfer. It then goes on to list the following records to be kept permanently:
a. customer account opening agreements and related account documents;
b. certified/attested copies of customer identification documents;
c. all customer transaction records and instructions; and
d. statements and details of customer accounts and balances.
187. Failure to carry out customer due diligence or to keep the documentation for at least ten years can lead to imprisonment for a period not
exceeding two years and (or) a fine not exceeding SAR500000 (EUR121908)
(s.19AMLL).
188. The customer identification obligations and record keeping obligations on all transactions require banking information to be available in Saudi
Arabia for all account holders.
In practice
189. The Saudi Arabian Monetary Agency (SAMA) is responsible for
supervision of the compliance with all the requirements stemming from the
AMLL, including the record keeping requirements for banks. SAMA supervises compliance with these requirements, as a part of the general supervision,
but also through targeted on-site inspections focused on AML issues. Within
SAMA the Inspection (on-site) and Supervision (off-site) Departments are
responsible for banking supervision.
190. The supervision model takes into account a combination of on-site
and off-site inspections. Off-site supervision consists of an analysis of the
documents and reports that are submitted by financial institutions on a periodical basis as well as the specific issues that were flagged during onsite
visits. As Saudi Arabia explains, all banks will get a full scope audit by
SAMA each year. Full scope on-site work is usually done by a joint team
of SAMA examiners and staff from an accounting firm (usually a big four
firm). SAMA checks selected institutions on their compliance with Saudi
Arabias anti-money laundering laws, evaluates the adequacy of customer due
diligence (CDD) measures taken and assesses the sufficiency of the implementation of know your customer (KYC) rules, while the accounting firm
will be looking at the financial accounts of the bank involved. In February
2012, SAMA updated the rules of opening bank accounts and the general
rules for their operation which stress that banks shall not conduct any transaction for any customer unless having sufficiently reviewed and verified the
customer identity.
191. SAMA carried out around 100 on-site targeted inspections annually
relating to AML/CFT in financial institutions regarding the years 2011, 2012
and 2013, as demonstrated in the table below. This included all domestic
banks (12) and all branches of foreign banks (12). Field inspections cover
various programmes. In addition to full scope inspections, SAMA conducts
targeted inspections regarding AML and CFT, UN Security Council resolutions implementation, or fiscal evasion. The same entity could therefore be
inspected several times a year under different programmes. Although Saudi
Arabia did not yet have the numbers for the year 2014, it stated that SAMA
representatives carried out supervisory visits to all banks branches of foreign
banks operating in Saudi Arabia during 2014 and prepared reports risks
related thereof.

Examinations and Inspections by SAMA of Banks and Exchange Companies
to verify fulfilment of AML/CFT requirements
Year
Examinations
Field inspections
2011
84
125
2012
29
71
2013
63
112
192. Regarding the amount of penalties imposed in relation to the breaching of AML/CFT requirements and the number of entities involved, statistics
provided by Saudi Arabia show that the number of entities involved reached
a peak in the year 2012 and fell quite drastically in the year after that. As
Saudi Arabia explains this is related to the AML/CFT programmes that
were carried out mainly during the years 2010 to 2012 and which specifically targeted compliance with customer identification requirements as well
as CDD measures. Supervisory bodies continued during the years 2013 and
2014 to implement inspection programmes and follow up to verify that such
institutions comply. The drop in penalties reflects the improvements that the
supervised entities made in this field following these programmes conducted
in the period 2010-12. Saudi Arabia confirms that the seriousness of the
contravention in 2013 was on average less important than in 2011, explaining
why the average gross amount of penalty in 2013 is considerably lower.
Number of institutions and financial fines that were imposed by SAMA to
the subjected institutions in respect of AML/CFT
Year
No. of entities
Gross amount of penalties (SAR)
2011
26
3887000
2012
91
8000000
2013
58
456433
193. During the three-year review period, bank information was requested
in at least four cases. Peers indicated that bank information was not provided
in all the cases where they requested for that type of information. Saudi
Arabia explains that in these cases the information exchange agreements
did not contain a provisions corresponding to Articles26(4) and 26(5) of the
OECD Model Tax Convention, and therefore it was not able to provide bank
information in response to EOI requests. However, Saudi Arabia stated that it
would not face any difficulties in obtaining this type of information in cases
where the EOI agreement did contain these provisions. Saudi Arabia explains
that it was able to obtain this type of information for EOI purposes in three
cases. Saudi Arabia further clarifies that it asked for this type of information
in domestic cases, and that the information in these cases was available. They
further explain that in these cases SAMA would be the main source for banking information in cases where this type of information is requested. Saudi
Arabia reports that SAMA provided information to DZIT for domestic purposes in response to (in total) 9 requests from DZIT in 2012, 34 requests in
2013, 31 request in 2014, and 81 requests during the year 2015. Saudi Arabia
explains that these numbers include responses to three EOI requests that were
made in 2014 and 2015.
194. The customer identification obligations and record keeping obligations on all transactions require banking information to be available in Saudi
Arabia for all account holders. Compliance by banks in respect of these legal
obligations is checked and supervised by the SAMA. Through their inspections, it has been established that banks keep the required information on
their clients and transactions.
Determination
Phase2 rating
Compliant
Compliance with the Standards: Access to information 65
B. Access to information
Overview
195. A variety of information may be needed in respect of the administration and enforcement of relevant tax laws and jurisdictions should have the
authority to access all such information. This includes information held by
banks and other financial institutions as well as information concerning the
ownership of companies or the identity of interest holders in other persons
or entities. This section of the report examines whether Saudi Arabias legal
and regulatory framework gives to its competent authority access powers
that cover all relevant persons and information, and whether the rights and
safeguards that are in place would be compatible with effective exchange of
information. It also assesses the effectiveness of this framework in practice.
196. Saudi Arabias competent authority, the Department of Zakat and
Income Tax, has the power to request all types of information from any
person, including other government bodies, irrespective of whether or not
the person is subject to tax in Saudi Arabia. This power can be used for information exchange purposes under a relevant international agreement, such
as a Double Taxation Convention, where the agreement contains a provision
corresponding to Article26(4) of the OECD Model Tax Convention. This is
because the hierarchy of laws in Saudi Arabia, based on the Islamic Shariah,
places international agreements providing for exchange of tax information
above domestic legislation once the international agreement is implemented
in Saudi Arabian domestic law by Royal Decree.
197. Following the same hierarchy of laws, the principle of bank secrecy
is overridden by international agreements containing a provision corresponding to Article26(5) of the OECD Model Tax Convention. In these cases,
the Saudi Arabian Monetary Agency (SAMA) will use its own information
gathering powers to obtain information from banks when requested to do so
by Saudi Arabias competent authority.
198. As at July 2015, 23 out of the 43DTCs concluded by Saudi Arabia contain provisions corresponding to Articles26(4) and 26(5) of the OECD Model
66 Compliance with the Standards: Access to information

Tax Convention. However, Saudi Arabia signed the Multilateral Convention on
29May 2013, and deposited its instrument of ratification on 17December 2015.
The Multilateral Convention will enter into force on 1April 2016.
199. The Multilateral Convention will also be a complementary basis for
exchanging information withjurisdictions with which Saudi Arabia is already
linked by a bilateral EOI instrument. In the case of Saudi Arabia, the entry
into force of this instrument will bring EOI with 36 of its 43DTC partners in
line with the standard and will bring the possibility to exchange information
in line with the standard with an additional 60jurisdictions and will provide
Saudi Arabia with an EOI network that covers a total of 102jurisdictions.
In all, the entry into force of this instrument will bring EOI with 95 of its
102partners in line with the standard. So, once the Multilateral Convention
enters into force for Saudi Arabia and these jurisdictions, Saudi Arabia can
use its information gathering powers to obtain information for EOI purposes with respect to requests received from these jurisdictions under the
Multilateral Convention. Nevertheless, Saudi Arabia should ensure that its
competent authority has the power to obtain all relevant information with
respect to all information exchange agreements (regardless of their form).
200. Saudi Arabia has the possibility to apply search and seizure powers
in order to obtain information from persons subject to income tax. In addition, zakat payers may be refused a zakat certificate if they refuse to provide
information for EOI purposes. Furthermore, Saudi Arabia introduced some
amendments in 2014 to clarify that a person can be held jointly liable for the
tax due on a Saudi Arabian taxpayer, if this person does not provide information for EOI purposes. All these compulsory powers are, however, not very
well adapted to obtaining information for EOI purposes. It is therefore recommended that Saudi Arabia reviews its powers for compelling the provision
of information for EOI purposes to ensure access to this information.
201. In Saudi Arabia, the rules regarding attorney-client privilege are
in line with the international standard. There is also no requirement in
Saudi Arabias domestic legislation that the taxpayer under investigation or
examination must be notified of a request, and no other rights and safeguards
exist in Saudi Arabia that will unduly prevent or delay effective exchange
of information. In practice, peer input did not identify any issues regarding
professional secrecy of lawyers during the period under review. In addition,
the Saudi Arabian competent authority reports that it did not encounter any
practical difficulties with the application of professional secrecy.
202. Concerning the rights and safeguards that apply to persons in Saudi
Arabia, DZIT is not subject to any obligation to notify any person regarding the access and exchange of information pursuant to its EOI agreements.
Although in theory it would be possible for any Saudi citizen to challenge the
furnishing of information to foreign tax authorities, it is unclear how a person
would obtain knowledge of the fact that information will be exchanged to a

foreign authority in a specific case, as there is no obligation to notify anyone
of such act. Consequently these issues did not come up in practice.
B.1. Competent Authoritys ability to obtain and provide information

Competent authorities should have the power to obtain and provide information that is the
subject of a request under an exchange of information arrangement from any person within
their territorial jurisdiction who is in possession or control of such information (irrespective
of any legal obligation on such person to maintain the secrecy of the information).
203. Under Saudi Arabias DTCs the Minister of Finance or his authorised representative is the designated competent authority. The Department
of Zakat and Income Tax (DZIT) has been delegated this task. DZIT also
exercises the powers to obtain information for information exchange purposes. Since June 2015 contact information for Saudi Arabias competent
authority is fully identifiable on the Global Forum website.
Ownership and identity information (ToRB.1.1) and accounting

records (ToRB.1.2)
204. The powers to obtain information for tax purposes are provided for
in the ITL. Section61(a) ITL provides that all persons and government bodies
shall provide DZIT with any information related to tax requested by DZIT.
The Saudi Arabian authorities confirmed that this power is generally applied
by sending a written request for information. There is no limitation in respect
of types of information that may be requested. The use of the term persons
ensures that information can be obtained from any person, and not only from
taxpayers (the term taxpayers is used in most other provisions of the ITL).
This includes all relevant entities and arrangements, as well as other government authorities. Finally, information can be requested regardless of whether
the person is required to keep that information.
205.

The main sources of information for DZIT are:

The tax and zakat databases. The Saudi Arabian competent authority
has access to an increasingly wide range of information collected as
part of the (electronic) registration and filing requirements applicable
in Saudi Arabia and stored in its institutional databases. Many of
the e-filing and e-registration services and requirements for zakat
and taxpayers have been introduced in recent years and the information collected by these means now starts flowing into tax and zakat
databases. This includes the information contained in zakat returns,
income tax returns as well as zakat and tax clearance certificates.
While the EOI office has access to the basic information related to

the taxpayer such as address, TIN and branch, full access is granted
to the Audit Department within DZIT and they would get involved
to obtain the requested information from the database. This would
include information regarding zakat and tax returns, accounting
information, audits etc. Most other taxpayer related information
would be asked directly from the taxpayer or a third party through
one of the regional and local tax offices.

Further databases accessible to and used by the Competent Authority

for gathering information include the databases of the Ministry
of Commerce and Industry as well as the Customs Department.
Ownership information in respect of a company or a partnership is
obtained mainly from the registration or investment certificate which
sets out all ownership details. In respect of a waqf this type of information is obtained from the Ministry of Islamic Affairs.
In cases where the requested information is in the possession or

control of a third party such as a service provider, e.g.a trustee, the
EOI office will request the information from the party that has such
information.
Accounting information in respect of a company or a partnership is

primarily obtained directly from the taxpayer. From 2014 onwards
financial accounts that have been audited by chartered accountants are deposited by the auditors in a specific database known as
Qawaem. This database is accessible for banks as well as various
government authorities, including DZIT. Accounting information,
including underlying documentation, in respect of a waqf is primarily
to be obtained from the Waqf Administration.
Banking information is obtained via the Saudi Arabian Monetary

Agency (SAMA).
206. In respect of bank information, it is noted that DZIT will not request
the information directly from a bank, but will make a request to SAMA
under section61(a) ITL, which in turn will seek the information from the
banks under the Banking Control Law (BCL). The background to this procedure is that SAMA, like DZIT, is a government authority falling under the
responsibility of the Minister of Finance and any dealings with banks from
the government side should go through SAMA (see further B.1.5). Saudi
Arabia clarified that it has responded on 20September 2015 to a request
for bank information in response to the request sent on 17December 2014.
Regarding the question whether the name of the account holder is required to
obtain bank information, Saudi Arabia clarifies that an IBAN number or any
other unique identifying information is sufficient to obtain the information.
207. Regarding the use of its access powers for domestic purposes, it
can be noted that Saudi Arabia has quite considerable experience with the
employment of its access powers to obtain bank information for domestic
purposes. As noted in the context of elementA.3 above, Saudi Arabia reports
that DZIT obtained bank information for domestic purposes from SAMA in
response to (in total) 31 request in 2014, and 81 requests during the year of
2015.
208. Saudi Arabia received a total of 9 requests during the period under
review. However, due to a number of different reasons, which are further
elaborated under this element and elementC.5 below, Saudi Arabia only used
its access powers in a limited amount of cases. The situation is the following:

One request was answered based on information available in DZITs

database, so there was no need to use access powers;
In relation to three requests, it appears that these requests did initially

not arrive with the EOI unit. This issue will be further discussed
under C.5. However, it can be noted that Saudi Arabia reported that
it has contacted the relevant EOI partners and has now exchanged all
requested information for two of the requests and partial information
for the third request. In these cases, access powers have been applied.
Two requests were not answered as the EOI agreement lacked provisions similar to art.26, paragraph4 and 5 of the OECD Model DTC,
although in one of these cases it could also not be established whether
the entity actually existed in Saudi Arabia. These issues are further
clarified in sections B1.3 and B.1.5 of the report;
In one request information was not exchanged as it pertained to

periods prior to the entry into force of (the protocol to) the EOI agreement. The EOI partner agreed with this interpretation;
Two requests are still pending and in different stages of being processed. Some of these cases are pending for a longer period of time.
One request (in respect of purchases in relation to companies in the
requesting jurisdiction regarding the years 2007-10 was sent 31July
2013 and sent to one of the branches of DZIT. These cases are further
dealt with underC.5.
209. In practice, therefore, Saudi Arabia obtained information by using its

access powers in respect of only three requests that were received during the
period under review, and only very recently. Other cases where access powers
could potentially be applied have been pending for a long time. Therefore,
Saudi Arabia has limited experience with the use of its access powers for
EOI purposes.
Use of information gathering measures absent domestic tax interest

(ToRB.1.3)
210. Section61(a) ITL contains an obligation for persons to provide information on request to DZIT for taxation purposes stipulated in the ITL. The
exchange of information with foreign tax authorities under an information
exchange agreement is not as such mentioned as a purpose of the ITL. However,
section35 ITL contains the following rule:
In case the conditions of a treaty or an international agreement to
which the Kingdom is a party are inconsistent with articles and
provisions of this Law [the ITL], the conditions of the treaty or
international agreement shall prevail.
211. This provision supports the general hierarchy of laws in Saudi
Arabia, which generally places international agreements above domestic
legislation once the international agreement is implemented in Saudi Arabian
domestic law by Royal Decree. The basis for this hierarchy of laws can be
found in the Islamic Shariah, under which priority should be given to the
general interest of the people over the specific interest of one person or a
group of persons. As international agreements generally affect more people
than domestic laws, they are regarded by Saudi Arabia to be in the general
human interest and therefore take precedence over domestic law. An official
opinion of the Saudi Arabian Ministry of Justice puts it as follows (unofficial
translation):
The treaties ratified by the Kingdom have the priority in implementation. It is noted that Islamic Shariah and its general rules
are to realise the peoples common and private interests that
conform with justice and fairness regardless of the level of the
human or national interest, or the interest of a category of people
the legal rule addresses. This means that as far as the transparency standards realise the interests and conform with justice,
Shariah principles expand the application ceiling. In regard to
ratified Tax Treaties on Avoidance of Double Taxation and the
exchange of information with other countries based on these treaties and according to transparency standards they are considered
a general human interest and have priority in application.
212. With respect to the access powers of the Saudi Arabian tax authorities, it should be noted that, as a general rule, international agreements do not
directly provide authorities with access powers; such access powers should
have their basis in domestic law. As the access powers stipulated in section61(a) ITL are expressly limited to information necessary for (domestic)
taxation purposes, it does not appear that these powers can be extended to
other purposes, such as exchange of information.
213. However, this is different where the international agreement contains a provision corresponding to Article26(4) of the OECD Model Tax
Convention. This provision states that the contracting parties shall use their
information gathering measures irrespective of whether they need such
information for their own tax purposes. Following section35 ITL and the
general hierarchy of law as described above, this means that Saudi Arabia
can and must use its access powers for information exchange purposes under
a DTC or other international agreement, such as a Tax Information Exchange
Agreement (TIEA) or the Multilateral Convention on Mutual Administrative
Assistance in Tax Matters, in order to fulfil the obligations under that international agreement, if the agreement contains a provision corresponding to
Article26(4) of the OECD Model Tax Convention.
214. This is supported by an amendment that Saudi Arabia made to its
Income Tax Law Implementing Regulations as of 19March 2014 to further
clarify the applicability of the access powers stipulated in section61(a) ITL.
Following the amendment, section58 (1) of the Implementing Regulations
now clarifies that the scope of DZITs access powers of section61 ITL
includes the power to obtain information it may request relevant to the
administration of Income Tax Law including implementation of tax treaties
to which the Kingdom is a party.16 Although this amendment clarifies that
the access powers stipulated in section61(a) ITL can be used for EOI purposes, it does not extend the use of these powers to situation where the treaty
or agreement lacks a provision corresponding to Article26(4) of the OECD
Model Tax Convention.
215. In practice, this situation materialised in 2012 when Saudi Arabia
received two requests for accounting information from one of its EOI partners. One of the requests also asked for bank information. The peer involved
noted that it did not receive any answer to these requests. In response, Saudi
Arabia explains that the EOI agreement did not include provisions similar
to paragraphs4 and paragraph5 (in respect of bank information) of the
OECD Model Tax Convention, although the EOI requests made reference
to the existence of such provisions. These issues are further clarified in sectionB.1.5 of the report.
16. In this respect Saudi Arabia further explains that any natural and corporate
person, taxpayer or not, who refuses to provide information to DZIT for
exchange of information purposes is considered to be not in compliance with
statutory requirements. This requirement applies to zakat payers as well, being
persons. Saudi Arabia explains that in case of non-compliance, DZIT will use
available means to enforce those who fail to comply with this requirement,
including denying the zakat certificate to zakat payers who refuse to comply with
this requirement.

216. As at July 2015 Article26(4) is included in 23 out of the 43bilateral
information exchange agreements concluded by Saudi Arabia. Furthermore,
Saudi Arabia ratified the Multilateral Convention and deposited its instrument of ratification on 17December 2015. The Multilateral Convention will
enter into force on 1April 2016. The entry into force of this instrument will
bring EOI with 95 of its 102partners in line with the standard.
Conclusion
217. Saudi Arabia was unable to answer two requests for information
during the period under review due to the restrictions under its domestic
law and the applicable EOI agreements. Although the entry into force of the
Multilateral Convention will bring the EOI relationship with 36 of its 43DTC
partners, including its main EOI partners, in line with the standard, it should
be noted that Saudi Arabia still has little practical experience in obtaining
information for EOI purposes in general and in exchanging (bank) information under bilateral EOI agreements which include 26(4) (and 26(5)) for EOI
purposes (see also B.1.5 below). Saudi Arabia should therefore monitor that
it obtains and exchanges information in accordance with the standard under
the EOI agreements that allow Saudi Arabia to obtain information regardless
of a domestic tax interest provided for by Saudi Arabias domestic legislation.
Compulsory powers (ToRB.1.4)

218. Jurisdictions should have in place effective enforcement provisions
to compel the production of information. The Saudi Arabian authorities have
certain compulsory powers at their disposal in this respect.
219. Firstly, Saudi Arabia introduced, in March 2014, a new provision as
section58(2) of the Income Tax Implementing Regulations: A natural or
corporate person who fails to comply with the provisions of the preceding
paragraph [which explicitly provides the power to DZIT to obtain information for EOI purposes under section61 ITL] shall be jointly liable with the
taxpayer for the tax due on taxpayer and for any penalties resulting therefrom.. Although this can be considered a positive step, the penalty can only
be imposed if there is a connection with a Saudi Arabian taxpayer which will
generally not be the case in EOI requests.
220. Second, the tax authorities have the power to conduct audits on taxpayers at their premises without prior notice, including seizing books, records and
other documents for 15days, to ensure that this taxpayer or another taxpayer
fulfils its obligations under the ITL (s.61(b) ITL and s.59 ITL Regulations).
However, the power to conduct an audit only applies to taxpayers under the
ITL. As the concept of taxpayer under the ITL is very limited and does not
include companies and partnerships with no foreign shareholders or partners,
the scope of the power to conduct an audit for information exchange purposes
is very limited.
221. Third, persons subject to zakat only, i.e.Saudi citizens and Saudi
companies and partnerships wholly owned by Saudi citizens, are not subject
to the authorities power to conduct an audit under the ITL. However, the
Saudi authorities indicated that if a zakat payer would refuse to provide information for EOI purposes, as an administrative measure this person would
not be issued a zakat certificate as it would not have complied with all its
obligations. A zakat certificate is required to bid for contracts and obtain and
maintain licenses to do business.
222. Considering the above, Saudi Arabia has the possibility to apply
search and seizure powers in order to obtain information from persons
subject to income tax. In addition, zakat payers may be refused a zakat certificate if they refuse to provide information for EOI purposes. Finally, Saudi
Arabia introduced some amendments in 2014 to clarify that a person can be
held jointly liable for the tax due on a Saudi Arabian taxpayer, if this person
does not provide information for EOI purposes. all these compulsory powers
are, however, not very well adapted to obtaining information for EOI purposes. It is therefore recommended that Saudi Arabia reviews its powers for
compelling the provision of information for EOI purposes to ensure access
to this information, for example by introducing direct monetary penalties for
not complying with section61(a) ITL without linking them to Saudi Arabian
income tax payers.
Secrecy provisions (ToRB.1.5)

223. Jurisdictions should not decline on the basis of its secrecy provisions
(e.g.bank secrecy, corporate secrecy) to respond to a request for information
made pursuant to an exchange of information mechanism.
Bank secrecy
224. The principle of bank secrecy is recognised in Saudi Arabia, and
finds its basis in section19 of the Banking Control Law (BCL). Although
section17 BCL in conjunction with clause 3(1)(G) of Ministerial Decision
no.3/2149, dated 14/10/1406 H (1986) [Rules for Enforcing Provisions of the
Banking Control Law] provides powers to SAMA to obtain any information
from banks, this power seems limited to information necessary for ensuring
the realisation of the purposes of the BCL.
225. Nevertheless, this limitation is lifted where an international agreement is effective which requires Saudi Arabia to provide bank information
to other jurisdictions, following the general hierarchy of laws as explained

above under sectionB.1.3. This means that where an international agreement
contains a provision corresponding to Article26(5) of the OECD Model Tax
Convention, SAMA is required to use its information gathering powers to
obtain information from banks and provide it to the Saudi Arabian competent
authority in response to a request from the Saudi Arabian competent authority based on an EOI request under such international agreement.
226. SAMA has confirmed in a letter to the Saudi Arabian competent
authority that requests for bank information coming from the competent
authority (i.e.DZIT) will be complied with if those requests are based on
a relevant DTC (i.e.where the DTC contains a provision corresponding to
Article26(5) of the OECD Model Tax Convention). The same will apply
where such request is based on another international agreement, such as a
TIEA or the Multilateral Convention.
227. As noted Saudi Arabia cannot use its information gathering powers
in respect of bank information if the EOI agreement lacked a provision similar to art.26, paragraph5 of the OECD Model DTC. In practice this situation
came up in the beginning of 2012 when Saudi Arabia received a request for
accounting and banking information from one of its EOI partners. The case
is described above under B.1.3 and the principle applies similarly here in
respect to the bank information that the request asked for. Also here it can be
noted, that both Saudi Arabia and the peer are now parties to the Multilateral
Convention, so once the Convention enters into force in respect of Saudi
Arabia both parties will be covered.
228. As at July 201523 out of 43DTCs concluded by Saudi Arabia
contain a provision corresponding to Article26(5) of the OECD Model
Tax Convention. In respect of the other DTCs concluded by Saudi Arabia,
bank secrecy forms an impediment to obtain and exchange bank information. However, as noted, Saudi Arabia ratified the Multilateral Convention
and deposited its instrument of ratification on 17December 2015. The
Multilateral Convention will enter into force on 1April 2016. The entry into
force of this instrument will bring EOI with 36 of its 43DTC partners in line
with the standard.
229. Nevertheless, Saudi Arabia was unable to answer two requests for
information during the period under review due to the restrictions under its
domestic law and the applicable EOI agreements. Although the entry into
force of the Multilateral Convention will bring the EOI relationship with
95 of its 102EOI partners, including its main EOI partners, in line with the
standard, it should be noted that Saudi Arabia has little practical experience
in obtaining information for EOI purposes in general and no experience in
exchanging banking information for EOI purposes under bilateral EOI agreements including article26(5) or the Multilateral Convention. Saudi Arabia
should therefore monitor that it exchanges bank information and other types
of relevant information in accordance with the standard under the EOI agreements that allow Saudi Arabia to obtain information regardless of a domestic
tax interest provided for by Saudi Arabias domestic legislation.
Professional privilege
230. The attorney-client privilege in Saudi Arabia is implemented through
the Code of Law Practice (Royal Decree No. M/38, CLP). The first sentence of section23 CLP reads as follows:
A lawyer shall not disclose any confidential information which
has been communicated to him or of which he has become aware
in the course of practicing his profession[], unless such nondisclosure constitutes a violation of a Shariah requirement.
231. The above rule only pertains to confidential information. In addition,
information must only be kept confidential when it has been communicated
to the lawyer in the course of practicing his profession. The definition of law
practice is included in section1 of the CLP, which states:
As herein used, the phrase law practice shall mean representation of third parties before courts of law, the Board of
Grievances, and other committees as may be set up pursuant to
laws, decrees and decisions to consider the cases falling within
their respective jurisdictions. It shall also mean rendering consultancy services based on the principles of Shariah and the rule of
law. Whoever practices this profession shall be called a lawyer.
Any person shall be entitled to litigate for himself.
232. The attorney-client privilege is therefore limited to information
produced in the course of legal proceedings (first sentence of section1 CLP)
and information produced for the purposes of providing legal advice (second
sentence of section1 CLP). It is also clear that any information coming to
the knowledge of a lawyer when acting in a different capacity, such as a
nominee shareholder, a trustee or a company director, is not covered by the
attorney-client privilege. Hence, it may be concluded that the principles of
attorney-client privilege in Saudi Arabia are in line with the international
standard. As Saudi Arabia explained, there was no case during the period
under review where the requested information was covered or might have
been covered by the attorney-client privilege and no issues in this respect
came up in practice.

Determination
The element is in place, but certain aspects of the legal implementation
of the element need improvement.
Factors underlying
recommendations
Recommendations
The compulsory powers available

to the Saudi Arabian authorities to
ensure that information is obtained
are not designed to address noncompliance with the access powers
used to obtain information for EOI
purposes.
Saudi Arabia should review its

powers for compelling the provision of
information for EOI purposes in order
to ensure that non-compliance with a
request to provide such information
can be appropriately addressed.
Phase2 rating
Largely Compliant
Factors underlying
recommendations
Saudi Arabia was unable to answer
two requests for information due to
the restrictions under its domestic law
and the applicable EOI agreements.
Although the entry into force of the
Multilateral Convention will bring
the EOI relationship with most of
its EOI partners in line with the
standard, it should be noted that
Saudi Arabia has little practical
experience in obtaining information
for EOI purposes in general and in
exchanging banking information for
EOI purposes under bilateral EOI
agreements in particular.
Recommendations
Saudi Arabia should monitor that
it exchanges bank information and
other types of relevant information
in accordance with the standard
under the EOI agreements that allow
Saudi Arabia to obtain information
regardless of a domestic tax interest
provided for by Saudi Arabias
domestic legislation.
B.2. Notification requirements and rights and safeguards

The rights and safeguards (e.g.notification, appeal rights) that apply to persons in the
requested jurisdiction should be compatible with effective exchange of information.
233. Rights and safeguards should not unduly prevent or delay effective
exchange of information. For instance, notification rules should permit exceptions from prior notification (e.g.in cases in which the information request is
of a very urgent nature or the notification is likely to undermine the chance of

success of the investigation conducted by the requesting jurisdiction).
Not unduly prevent or delay exchange of information (ToRB.2.1)

234. There is no requirement in Saudi Arabias domestic legislation that the
taxpayer under investigation or examination must be notified of a request.17
235. It should be noted that section43 of the Basic Law provides that [t]
he Kings Court and that of the Crown Prince shall be open to all citizens and
to anyone who has a complaint or a plea against an injustice. This means
that in theory it is possible for any Saudi citizen to challenge the furnishing
of information to foreign tax authorities. However, it is unclear how a person
would obtain knowledge of the fact that information will be exchanged to a
foreign authority in a specific case, as there is no obligation to notify anyone
of such act. Consequently these issues did not come up in practice.
236. Peer input did not identify any issues during the period under review
and the Saudi Arabian authorities did not mention any issue in this respect.
Determination
Phase2 rating
Compliant
17.
For purposes of this report, unless treatment of tax and zakat payers may vary,
the term taxpayer also refers to zakat payer.
Compliance with the Standards: Exchanging information 79
C. Exchanging information
Overview
237. Jurisdictions generally cannot exchange information for tax purposes
unless they have a legal basis or mechanism for doing so. In Saudi Arabia,
the legal authority to exchange information derives from its information
exchange agreements, as soon as the agreement is effective and approved by
Royal Decree. This section of the report examines whether Saudi Arabia has
a network of information exchange agreements that would allow it to achieve
effective exchange of information in practice.
238. Saudi Arabia has a network of DTCs covering 43jurisdictions.
However, Saudi Arabias domestic law does not allow them to access bank
information or to obtain information in the absence of a domestic tax
interest unless the information exchange agreement contains provisions corresponding to Articles26(4) and 26(5) of the OECD Model Tax Convention.
Consequently, as of the cut-off date only 23 of its DTCs, of which 10 are
in force, allow Saudi Arabia to fully exchange information according to
the international standard. However, Saudi Arabia ratified the Multilateral
Convention and deposited its instrument of ratification on 17December 2015.
The Multilateral Convention will enter into force on 1April 2016 and will
provide Saudi Arabia with an EOI network that covers a total of 102jurisdictions. The entry into force of this instrument will also bring EOI with 36 of
its 43DTC partners in line with the standard.
239. A number of jurisdictions wish to negotiate an information exchange
agreement with Saudi Arabia. Although these particular jurisdictions are
covered by the Multilateral Convention since 2014, it is nevertheless recommended that Saudi Arabia should be prepared to enter into agreements for
exchange of information (regardless of their form) with all relevant partners,
meaning those partners who are interested in entering into an information
exchange arrangement with it.
240. The confidentiality of information exchanged with Saudi Arabia
is protected by obligations implemented in the information exchange
80 Compliance with the Standards: Exchanging information

agreements, complemented by domestic legislation which provides for maintaining confidentiality of information by tax officials. This is also ensured in
practice. Consequently there was no case where information was unlawfully
disclosed during the period under review.
241. Saudi Arabias agreements ensure that the contracting parties are
not obliged to provide information which would disclose any trade, business,
industrial, commercial or professional secret or trade process, or information
the disclosure of which would be contrary to public policy.
242. The designated Competent Authority for exchanging information for
tax purposes under all Saudi Arabian exchange of information instruments is
the Minister of Finance or his authorised representative. The Department of
Zakat and Income Tax (DZIT) has been delegated this task. However, the
function of competent authority was shifted from the International Economic
Relations directorate within the Ministry of Finance to the international
operations department within DZIT during the period under review. It
appears that peers had difficulty to clearly identify this change in the contact
information for Saudi Arabias competent authority. Requests that were still
sent to the Ministry of Finance were not answered, as it appears that these
requests did not arrive with DZIT. Since June 2015 contact information for
Saudi Arabias competent authority is fully identifiable on the Global Forum
website.
243. Saudi Arabia still has fairly limited experience in EOI but is considered by its EOI partners to be an important partner. Saudi Arabia has
received nine requests for information over the period of review. From these
nine requests initially only six requests actually arrived with DZIT. From
these six requests only one was initially replied to. More recently, Saudi
Arabia has communicated with its EOI partners regarding pending requests
as well as requests that were initially not received. As a result, information
has been exchanged in some cases, while in other cases the EOI partner has
been informed of the reason why information could not be exchanged.
244. Although Saudi Arabia more recently undertook efforts to get in
touch with the requesting jurisdictions and respond to their requests or provide them with an explanation as to why certain information could not be
provided, it appears that Saudi Arabia only recently implemented organisational processes to ensure effective exchange of information. It appears that
these processes were not functioning or monitored during the period under
review. In all, there are certain areas which need improvement in order to
ensure that information is provided in a timely manner in all cases (see sectionC.5). Saudi Arabia should also respond to EOI partners in cases where it
is not able to respond to requests and provide status updates in cases where it
is not in a position to meet the 90day deadline.
C.1. Exchange-of-information mechanisms

Exchange of information mechanisms should allow for effective exchange of information.
245. Saudi Arabia has concluded 43DTCs (see Annex2). This section of
the report explores whether these agreements allow Saudi Arabia to effectively exchange information.
Foreseeably relevant standard (ToRC.1.1)

246. The international standard for exchange of information envisages
information exchange to the widest possible extent. Nevertheless it does not
allow fishing expeditions, i.e.speculative requests for information that have
no apparent nexus to an open inquiry or investigation. The balance between
these two competing considerations is captured in the standard of foreseeable relevance which is included in Article26(1) of the OECD Model Tax
Convention, set out below:
The competent authorities of the Contracting States shall exchange
such information as is foreseeably relevant for carrying out the
provisions of this Convention or to the administration or enforcement of the domestic laws concerning taxes of every kind and
description imposed on behalf of the Contracting States, or of their
political subdivisions or local authorities, insofar as the taxation
thereunder is not contrary to the Convention. The exchange of
information is not restricted by Articles1 and2.
247. Saudi Arabia ratified the Multilateral Convention and deposited its
will enter into force on 1April 2016. Saudi Arabias exchange of information
with over 55jurisdictions is likely to occur exclusively under this Convention
once this is in force in Saudi Arabia and the partner jurisdictions, as Saudi
Arabia currently has no bilateral agreements with them. The Multilateral
Convention will also be a complementary basis for exchanging information
withjurisdictions with which Saudi Arabia is already linked by a bilateral
EOI instrument.
248. Saudi Arabia concluded 13DTCs with EOI partners that are not
signatories to the Multilateral Convention. Six of these DTCs were signed
after January 2013 and are in line with the standard.18 The other seven DTCs
concluded by Saudi Arabia provide for the exchange of information that is
necessary for carrying out the provisions of the Convention or of the domestic laws of the Contracting States. This relates to the DTCs with Bangladesh,
18.
This regards the DTCs with Algeria, Ethiopia, FYROM, Kyrgyzstan, Tajikistan
and Venezuela.

Belarus, Malaysia, Pakistan, Syria, Uzbekistan and Viet Nam. The Commentary
to Article26(1) of the OECD Model Tax Convention refers to the standard of
foreseeable relevance and states that the Contracting States may agree to
an alternative formulation of this standard that is consistent with the scope
of the Article, for instance by replacing foreseeably relevant with necessary. However, the Saudi Arabian authorities state that they interpret the term
foreseeably relevant to have a wider scope than the term necessary in this
respect. It is, however, not clear what information would not be covered where
the term necessary is used in the information exchange agreements, as this is
something which generally only arises where a request is refused because the
requested information would not be necessary for the requesting jurisdictions
domestic tax laws. Nevertheless, Saudi Arabian authorities explained that in
practice they do not use a different interpretation in this respect and peers did
not report any issues in this respect either.
249. It should be noted, however, that Saudi Arabia did not exchange information in one case, because the requested information pertained to periods
prior to the entry into force of relevant provisions (included in the protocol) of
the EOI agreement.19
In respect of all persons (ToRC.1.2)

250. For EOI to be effective it is necessary that a jurisdictions obligations
to provide information are not restricted by the residence or nationality of
the person to whom the information relates or by the residence or nationality
of the person in possession or control of the information requested. For this
reason the international standard for EOI envisages that EOI mechanisms will
provide for exchange of information in respect of all persons.
251. All DTCs concluded by Saudi Arabia specifically include a provision
which extends the scope of the exchange of information Article to persons
other than residents of one of the Contracting States, allowing for exchange
of information in respect of all persons.
252. In practice, no issue restricting exchange of information in respect of
the residence or nationality of the person to whom the information relates or
of the holder of information has been indicated by Saudi Arabian authorities
or peers.
19.
Saudi Arabia clarified that it has responded to this request after the onsite visit
via e-mail on 7June 2015 in which it stated that the requested information relates
to periods prior to the effective date of the Protocol for exchange of information
between the two countries and, therefore, it could not provide the requested
information. In its response the requested jurisdiction stated that it agreed with
the position of the Saudi Arabias competent authority on this request.
Obligation to exchange all types of information (ToRC.1.3)

253. Jurisdictions cannot engage in effective exchange of information if
they cannot exchange information held by financial institutions, nominees
or persons acting in an agency or a fiduciary capacity, as well as ownership information. Both the OECD Model Convention (Article26(5)) and the
OECD Model TIEA (Article5(4)), which are primary authoritative sources of
the standards, stipulate that bank secrecy cannot form the basis for declining
a request to provide information and that a request for information cannot be
declined solely because the information is held by nominees or persons acting
in an agency or fiduciary capacity or because the information relates to an
ownership interest.
254. The absence of a provision corresponding to Article26(5) of the
OECD Model Tax Convention does not automatically create restrictions
on the exchange of information held by banks, other financial institutions,
nominees, agents and fiduciaries, as well as ownership information. The
Commentary to Article26(5) indicates that while paragraph5 represents
a change in the structure of the Article (as compared to previous versions),
it should not be interpreted as suggesting that the previous version of the
Article did not authorise the exchange of such information.
255. As of January 2013 it was noted that only the DTCs with the Czech
Republic, France, Japan, Malta, Poland, Singapore and Viet Nam contain a
provision corresponding to Article26(5) of the OECD Model Tax Convention.
This is also the case for the 12DTCs that Saudi Arabia concluded after the
Phase1 report. In addition, the DTCs with Ireland, Spain and the United
Kingdom contain a similar provision, with the specific condition that information held by financial institutions, nominees or persons acting in an agency or
a fiduciary capacity shall be exchanged as long as the domestic laws of both
Contracting States so allow. According to the Saudi Arabian authorities, all
of these DTCs allow them to exchange bank information. Furthermore, Saudi
Arabia Saudi Arabia ratified the Multilateral Convention and deposited its
will enter into force on 1April 2016. Since the Multilateral Convention will
also be a complementary basis for exchanging information withjurisdictions
with which Saudi Arabia is already linked by a bilateral EOI instrument,
exchange of bank information with all these jurisdictions will in practice be
covered.
256. As a result, there remain only a small number of bilateral agreements
with EOI partners that are not signatories to the Multilateral Convention
and where the information exchange agreement does not contain a provision
corresponding to Article26(5). This regards the DTCs with Bangladesh,
Belarus, Malaysia, Syria, Uzbekistan and Viet Nam. It is recommended that

Saudi Arabia updates these remaining DTCs to include a provision corresponding to Article26(5) of the OECD Model Tax Convention.
257. As described in sectionB.1.5 of this report, Saudi Arabia cannot
access bank information for information exchange purposes where the
information exchange agreement does not contain a provision corresponding to Article26(5). This issue materialised in practice as Saudi Arabia did
not answer a request for banking information that it received in the beginning of 2012 because it could not use its information gathering powers as
the EOI agreement with the jurisdiction involved lacked a provision similar
to art.26, paragraph5 of the OECD Model Tax Convention. It is therefore
recommended that Saudi Arabia update its DTCs to include a provision corresponding to Article26(5) of the OECD Model Tax Convention.
Absence of domestic tax interest (ToRC.1.4)

258. The concept of domestic tax interest describes a situation where a
contracting party can only provide information to another contracting party
if it has an interest in the requested information for its own tax purposes. A
refusal to provide information based on a domestic tax interest requirement
is not consistent with the international standard. Jurisdictions must be able
to use their information gathering measures even though invoked solely to
obtain and provide information to the requesting jurisdiction.
259. As of January 2013 it was noted that only a limited number of Saudi
Arabias DTCs contained a provision corresponding to Article26(4). It was
also noted that the absence of this provision restricts the Saudi Arabian authorities in accessing information for exchange purposes under its information
exchange agreements. Saudi Arabia ratified the Multilateral Convention and
deposited its instrument of ratification on 17December 2015. The Multilateral
Convention will enter into force on 1April 2016. The entry into force of this
instrument will bring EOI with 95 of its 102partners in line with the standard. Since the Multilateral Convention will also be a complementary basis for
exchanging information withjurisdictions with which Saudi Arabia is already
linked by a bilateral EOI instrument, exchange of information regardless of a
domestic tax interest with all these jurisdictions will in practice be covered.
260. As a result, there remain only a small number of bilateral agreements
with EOI partners that are not signatories to the Multilateral Convention
and where the information exchange agreement does not contain a provision
corresponding to Article26(5). This regards the DTCs with Bangladesh,
Belarus, Malaysia, Syria, Uzbekistan and Viet Nam. It is recommended that
Saudi Arabia updates these DTCs to include a provision corresponding to
Article26(5) of the OECD Model Tax Convention.
Absence of dual criminality principles (ToRC.1.5)

261. The principle of dual criminality provides that assistance can only be
provided if the conduct being investigated (and giving rise to the information
request) would constitute a crime under the laws of the requested country if
it had occurred in the requested country. In order to be effective, exchange of
information should not be constrained by the application of the dual criminality principle.
262. None of the DTCs concluded by Saudi Arabia applies the dual criminality principle to restrict the exchange of information. Accordingly, there
has been no case when Saudi Arabia declined a request because of a dual
criminality requirement.
Exchange of information in both civil and criminal tax matters

(ToRC.1.6)
263. Information exchange may be requested both for tax administration
purposes and for tax prosecution purposes. The international standard is not
limited to information exchange in criminal tax matters but extends to information requested for tax administration purposes (also referred to as civil
tax matters).
264. All of the DTCs and concluded by Saudi Arabia cover both civil and
criminal tax matters.
265. In practice, there has been no case where Saudi Arabia declined a
request because it related to a criminal tax matter, and no peers have raised
any issues in this regard.
Provide information in specific form requested (ToRC.1.7)

266. In some cases, a Contracting State may need to receive information
in a particular form to satisfy its evidentiary or other legal requirements.
Such forms may include depositions of witnesses and authenticated copies
of original records. Contracting States should endeavour as far as possible to
accommodate such requests. The requested State may decline to provide the
information in the specific form requested if, for instance, the requested form
is not known or permitted under its law or administrative practice. A refusal
to provide the information in the form requested does not affect the obligation
to provide the information.
267. No restrictions apply in any DTC concluded by Saudi Arabia for
information to be provided in the specific form requested. Accordingly,
there has been no case when Saudi Arabia declined to provide the requested
information in adequate form and no issue in this respect has been reported.
In force (ToRC.1.8)
268. Exchange of information cannot take place unless a jurisdiction has
exchange of information arrangements in force. Where such arrangements
have been signed, the international standard requires that jurisdictions must
take all steps necessary to bring them into force expeditiously. International
agreements are approved by the Council of Ministers, after which a Royal
Decree ratifying the agreement is issued. The process is finalised by Saudi
Arabia notifying its treaty partner of the completion of the ratification procedure in Saudi Arabia.
269. Of the 43DTCs concluded by Saudi Arabia, nine are not in force.
This regards eight DTCs that were signed after February 2013 (Algeria,
Ethiopia, Former Yugoslav Republic of Macedonia, Gabon, Morocco,
Portugal, Sweden and Venezuela) as well as the DTC with Kazakhstan (). In
respect of the DTC with Kazakhstan, Saudi Arabia has completed its internal
ratification and notified the Kazakhstan authorities. This is also the case
for the DTCs with Algeria and Ethiopia. The remaining six DTCs (Former
Yugoslav Republic of Macedonia, Gabon, Morocco, Portugal, Sweden and
Venezuela) are still in the process of ratification, which takes on average
10months to complete, according to the Saudi Arabian authorities.
270. In respect of a few of its signed DTCs, Saudi Arabia has not yet taken
all steps necessary on its part to bring those agreements into force. Saudi
Araba ratified the Multilateral Convention and deposited its instrument of
ratification on 17December 2015. Consequently, the Multilateral Convention
Be given effect through domestic law (ToRC.1.9)

271. For information exchange to be effective, the parties to an exchange
of information arrangement need to enact any legislation necessary to comply
with the terms of the arrangement. In Saudi Arabia, international agreements
are implemented in its domestic law by Royal Decree (s.70 Basic Law).
272. Saudi Arabias domestic law does not allow them to access bank
information (see sections B.1.5 and C.1.3) where there is not a possibility
to exchange information under the Multilateral Convention and where the
DTC does not contain a provision corresponding to Article26(5) of the
OECD Model Tax Convention. In addition, a domestic tax interest mutatis
mutandis applies where the DTC does not contain a provision corresponding
to Article26(4) of the OECD Model Tax Convention (see sections B.1.3 and
C.1.4).
273. Of the 43DTCs signed, only 23 contain provisions corresponding
to Article26(4) and 26(5) of the OECD Model Tax Convention. Of these
23 agreements, 10 are in force. The information exchange agreements have

therefore not been given full effect through domestic law in Saudi Arabia.
Determination
Phase2 rating
Compliant
C.2. Exchange of information mechanisms with all relevant partners

The jurisdictions network of information exchange mechanisms should cover
all relevant partners.
274. Ultimately, the international standard requires that jurisdictions

exchange information with all relevant partners, meaning those partners
who are interested in entering into an information exchange arrangement.
Agreements cannot be concluded only with counterparties without economic
significance. If it appears that a jurisdiction is refusing to enter into agreements or negotiations with partners, in particular ones that have a reasonable
expectation of requiring information from that jurisdiction in order to properly administer and enforce its tax laws it may indicate a lack of commitment
to implement the standards.
275. Saudi Arabia has DTCs in place with 43jurisdictions, including with
five of its main trading partners (Japan, China, Korea, India and France,
but not Germany and the United States). As explained in sectionC.1 of this
report, a number of its DTCs do not allow Saudi Arabia to exchange information according to the international standard. However, it is also noted that
Saudi Arabia ratified the Multilateral Convention and deposited its instrument of ratification on 17December 2015. Consequently the Convention will
enter into force on 1April 2016. It can be noted that Germany and the United
States are also signatories to the Multilateral Convention. Furthermore, since
the Multilateral Convention, once in force for these jurisdictions, will also be
a complementary basis for exchanging information withjurisdictions with
which Saudi Arabia is already linked by a bilateral EOI instrument, exchange
of information in line with the standard with all these jurisdictions will in
practice be covered.
276. Comments were sought from Global Forum member jurisdictions in
the course of the preparation of this report. Three jurisdictions commented

that they approached Saudi Arabia to indicate their interest in entering into
an information exchange agreement. As of January 2013 Saudi Arabia confirmed that it then was in contact with these three jurisdictions with a view
to enter into negotiations. However, it appears that an official response was
not received by these jurisdictions or with long delay. Even though these
jurisdictions are now covered by the Multilateral Convention, Saudi Arabia
should have contacted these jurisdictions with a view to enter into exchange
of information agreements more expeditiously, as the international standard
requires that a jurisdiction exchanges information with all relevant partners,
meaning those partners who are interested in entering into an information
exchange agreement. It is therefore recommended that Saudi Arabia ensures
that it, expeditiously, enters into exchange of information agreements (regardless of their form) with all relevant partners.
Phase1 determination
The element is in place, but certain aspects of the legal implementation
of the element need improvement.
Factors underlying
recommendations
Recommendations
Some delays have been experienced

in Saudi Arabia responding to
requests from other jurisdictions
to start negotiations with a view to
enter into an information exchange
agreement.
Saudi Arabia should, expeditiously,

enter into agreements for exchange of
information (regardless of their form)
with all relevant partners, meaning
those partners who are interested in
entering into an information exchange
arrangement with it.
Phase2 rating
Largely compliant.
C.3. Confidentiality
The jurisdictions mechanisms for exchange of information should have adequate
provisions to ensure the confidentiality of information received.
Information received: disclosure, use, and safeguards (ToRC.3.1)

277. Governments would not engage in information exchange without the
assurance that the information provided would only be used for the purposes
permitted under the exchange mechanism and that its confidentiality would
be preserved. Information exchange instruments must therefore contain
confidentiality provisions that spell out specifically to whom the information

can be disclosed and the purposes for which the information can be used.
In addition to the protections afforded by the confidentiality provisions of
information exchange instruments, jurisdictions with tax systems generally
impose strict confidentiality requirements on information collected for tax
purposes.
278. All of the information exchange agreements concluded by Saudi Arabia
contain a provision targeted at ensuring the confidentiality of information
exchanged and limiting the disclosure and use of information received, which
has to be respected by Saudi Arabia as a party to these agreements. No issues in
this respect came up in practice.
279. Section59 ITA provides for the Department of Zakat and Income Tax
and its entire staff to maintain confidentiality of information pertaining to
taxpayers to which they have access. Any information received by the Saudi
Arabian authorities in response to an information exchange request must
therefore be kept confidential, as such information must relate to a person
(potentially) subject to Saudi Arabian tax (otherwise the request would not be
valid).Penalties can be imposed on officials breaching confidentiality on the
basis of section32 of the Officials Disciplinary Measures Law and section12
of Civil Service Ministers Resolution no.10800/703.
All other information exchanged (ToRC.3.2)

280. Confidentiality rules should apply to all types of information
exchanged, including information provided in a request, background documents
to such requests, and any other documents or communications reflecting such
information.
281. The confidentiality provision of section59 ITA only refers to information pertaining to taxpayers under the ITL. Although information may
be related to other persons than taxpayers under the ITL, e.g.in the case of
information provided in a request made to the Saudi Arabian authorities,
all DTCs concluded by Saudi Arabia contain a provision stating that any
information received [] by a Contracting State shall be treated as secret
in the same manner as information obtained under the domestic laws of
that Contracting State. As Saudi Arabia is bound by the provisions of these
DTCs, all information received by the Saudi Arabian authorities under the
DTCs must be kept confidential in the same manner as under section59ITL.
282. In addition, the By-Law of the Public Service Law stipulates in
Article15, Paragraph(e) that a public servant should not disclose any confidential information to which he has access by virtue of a public position.
Saudi Arabia explains that this provision includes the competent authority
officials and is applicable even after the official retires.

283. An exception to the obligation to keep information confidential exists
for the purpose of disclosing it to the competent authorities of another jurisdiction in accordance with a treaty to which Saudi Arabia is a party (s.59(a)
(4) ITL).
In practice
284. All officials dealing with information on taxpayers are obliged to
keep all the information confidential. The confidentiality rules are provided mainly in the Income Tax Law (ITL), as well as in the provisions on
confidentiality contained in bilateral agreements. They are also part of the
Multilateral Convention.
285. The requests received by the EOI office are registered in a database,
which is accessible only by authorised officials. All EOI related information
is kept separately and treated as confidential. Paper documents are safely
stored in secure cabinets in the EOI Unit. Access to files is restricted to
authorised officials only. Information obtained from a treaty partner, including the EOI request itself, is never disclosed to the taxpayer.
286. Entry to the premises of DZIT is restricted and guarded. Information
obtained in relation to requests that is kept in the respective taxpayers file
can be accessed only by the authorised assessing officer responsible for the
respective taxpayers assessment. It can be distinguished from information
obtained from domestic sources and is clearly identifiable.
287. DZIT was audited and certified compliant with the international
standard on information security ISO27001:2013. This means that the main
information security risks of DZIT have been identified and brought under
explicit management control. Saudi Arabia explains that monitoring in
respect of data confidentiality takes place at various levels. First, at the level
of the tax authorities, supervision and verification of compliance with work
requirements, including protecting data confidentiality, is part of the internal
control and audit function that is undertaken by a specialised unit within the
tax authorities. This unit reports (directly) to the Director General. In addition, the General Audit Bureau, an official independent entity that reports
to the Council of Ministers, verifies that all official entities and agencies,
including the Tax Authority, are complying with their requirements, including confidentiality requirements for the Tax Authority.
288. As Saudi Arabia explains the information provided to the holder of
information when he/she is asked by DZIT to provide the information which
is requested by a treaty partner is limited to necessary information such as
the reason for request, reference to the relevant DTA and a description of the
information requested.
289. As discussed in the report under elementC.5, three requests were

initially not received by the competent authority at the time. Saudi Arabia
explained that this was due to the fact that the function of competent authority was shifted from the International Economic Relations Directorate within
the Ministry of Finance to the International Operations Department within
DZIT (also part of the Ministry of Finance), and the requests were sent to the
former competent authority. As explained under elementC.5, this change was
not efficiently communicated to all of Saudi Arabias exchange of information partners. Nevertheless, the former competent authority was also subject
to the obligation to keep the information received confidential. The three
requests were located by the new competent authority in June 2015 and the
files were transmitted to their offices. This means that at all times the information was in a location where it was protected from unauthorised disclosure.
Therefore, no breach of confidentiality was encountered during the review
period either in a domestic or in an exchange of information context. Also,
no issues regarding confidentiality of information have been raised by Saudi
Arabias exchange of information partners.
Determination
Phase2 rating
Compliant
C.4. Rights and safeguards of taxpayers and third parties

The exchange of information mechanisms should respect the rights and
safeguards of taxpayers and third parties.
Exceptions to requirement to provide information (ToRC.4.1)

290. The international standard allows requested parties not to supply
information in response to a request in certain identified situations.
291. In line with the standard, under all of Saudi Arabias DTCs the contracting parties are not obliged to provide information which would disclose
any trade, business, industrial, commercial or professional secret or trade
process, or information the disclosure of which would be contrary to public
policy. These terms are not defined in the respective agreements, meaning
that domestic law definitions apply. In this context, no issues were found in

Saudi Arabias domestic legal and regulatory framework (see sectionB.1.5
of this report).
292. Saudi Arabia reports that, during the period under review, there have
been no instances where professional privileges or any other exceptions have
been claimed in Saudi Arabia in order not to provide information to the tax
authorities in cases related to exchange of information.
Determination
Phase2 rating
Compliant
C.5. Timeliness of responses to requests for information

The jurisdiction should provide information under its network of agreements
in a timely manner.
Responses within 90days (ToRC.5.1)

293. In order for exchange of information to be effective it needs to
be provided in a timeframe which allows the tax authorities to apply the
information to the relevant cases. If a response is provided but only after
a significant lapse of time the information may no longer be of use to the
requesting authorities. This is particularly important in the context of international cooperation as cases in this area must be of sufficient importance
to warrant making a request.
294. The DTC with Uzbekistan provides for the competent authorities
to exchange information through diplomatic channel. As there were no
EOI requests received from or sent to Uzbekistan it could not be assessed
whether this procedural requirement prevents Saudi Arabia from responding
to a request within 90days. There are no other specific legal or regulatory
requirements in place which would prevent Saudi Arabia from responding to
a request for information by providing the information requested or providing
a status update within 90days of receipt of the request.
295. During the period of review from 1January 2012 to 31December
2014 in total nine requests for information were sent to Saudi Arabia.
However, as will be discussed further below, it appears that Saudi Arabia
initially only received six of these requests. The three cases that did initially
not arrive with the EOI Unit, have been received after Saudi Arabia contacted
the relevant EOI partners following the on-site visit. Saudi Arabia clarifies
that it has provided the requested information in response to two of these
cases. In the remaining case it reported that it was able to provide parts of the
requested information, and as a result this case is still pending.
296. The following table shows the time taken to send the final response
to incoming EOI requests including the time taken by the requesting jurisdiction to provide clarification (if asked) over the three year period from
1January 2012 to 31December 2014.
Response times for requests sent to Saudi Arabia during the three-year review period
2012
2013
2014
Total Average
Num.
Num.
Num.
Num.
Total number of requests receiveda (a+b+c+d+e)
100%
100%
100%
100%
Full responseb
33%
0%
0%
11%
33%
0%
0%
11%
(a)
33%
0%
33%
22%
> 1year
(b)
0%
33%
33%
22%
Declined for valid reasons
(c)
0%
33%
0%
11%
Failure to obtain and provide information requested (d)
67%
0%
0%
22%
Requests still pending
0%
33%
33%
22%
(e)
Notes: a. The Saudi Arabian method of counting requests: Saudi Arabia counts a request in respect of
a single taxpayer where more than one piece of information is requested or where a further
request for information on the same matter where the original request has not yet been fully
satisfied as one request. (e.g.per letter received or per entity involved).

b. The time periods in this table are counted from the date of sending of the request to the date
on which the final and complete response was issued.
297. As the table shows a limited number of nine requests were sent to
Saudi Arabia during the three year period. The number of requests received
was fairly stable throughout the review period, as Saudi Arabia received three
requests per year during the review period. Most requests were sent by three
EOI partners.
298. In practice, Saudi Arabia initially replied to only one of the requests
that it received during the period under review. This request asked for the
address of a taxpayer, and could be answered within 90days with information from the databases that are directly accessible by the Competent
Authority. The peer involved was satisfied with the timeliness of the response
and the information provided.

299. Nevertheless, in the other eight cases the EOI partners did initially
not receive any information or an update from Saudi Arabia clarifying the
status of their request. Three different peers stated in their peer input that
they did not receive any response from Saudi Arabia after sending their
requests, although it can be noted that Saudi Arabia more recently undertook
efforts to get in touch with the requesting jurisdictions and respond to their
requests or provide them with an explanation as to why certain information
could not be provided.
300. Saudi Arabia reports that the function of competent authority was
shifted from the International Economic Relations directorate within the
Ministry of Finance to the international operations department within DZIT
two years ago. Although Saudi Arabia reports that it sent a letter and an
e-mail to update the Competent Authority contact details to EOI partners
in some cases, it appears that peers had difficulty to clearly identify this
change in the contact information for Saudi Arabias competent authority.
Nevertheless, Saudi Arabia states that it generally provides this information
to treaty partners when finalising treaty negotiations. Since June 2015 contact
information for Saudi Arabias competent authority is fully identifiable on the
Global Forum website. However, it appears that three requests sent during the
period under review did initially not arrive with the EOI unit.
301. Officials from DZIT confirmed during the onsite visit that they had
not received these requests at their end and stated that communication gaps
in the transitional period could be the reason for these requests ending up in
the wrong place. Nevertheless, DZIT stated its willingness to look at these
requests and contacted these jurisdictions directly after the onsite visit in
order to see whether these requests could still be processed and answered.
As mentioned above, information has been provided with respect to all these
requests, although one is still partially pending.
302.
In relation to the remaining five requests, the situation is the following:
In three cases (involving accounting information) Saudi Arabia initially didnt provide any feedback or answer to the partners that it
declined the request.
-
As discussed in sections B.1.3 and B.1.5 of the report two

requests from 2012 were not answered as the EOI agreement
lacked provisions similar to art.26, paragraph4 and 5 of the
OECD Model DTC. The peer involved noted in its peer input that
it did not receive any answer to these requests, but Saudi Arabia
stated that it had recently informed this peer of the fact that information could not be exchanged.
One request was declined as it pertained to periods prior to the

entry into force of (the protocol to) the EOI agreement. Although
the peer involved eventually noted that it agreed with the position of Saudi Arabias competent authority, also in this case Saudi
Arabia initially didnt provide any feedback or answer to the
partner that it declined the request.

The two remaining cases were pending for a longer time, but the
Saudi Arabian authorities did initially not provide an update on the
status of the request to the EOI partner.
-
These requests that were sent in 2013 and 2014 were pending
and in different stages of being processed. One request was sent
31July 2013 and sent to one of the branches of DZIT. This case
is still pending. The second request was sent on 25September
2014 and asked for a control of the tax residency of certain
individuals;.
In both cases the peers involved commented in their input that

they initially didnt get any response from Saudi Arabia in any of
its cases. However, in respect to the second request Saudi Arabia
clarified that it has responded to this request after the onsite
visit via e-mail on 20September 2015, in which it provided part
of the requested information (this request involved accounting
information - economic reality, activity of a company located in
SA and control of the payment of an invoice). Saudi Arabia further reports that after inspecting the Saudi taxpayer involved, it
obtained the data requested and responded in an (second) e-mail
on November 29, 2015.
303. During the three-year review period, Saudi Arabia did not send an
acknowledgment of receipt. Moreover, Saudi Arabian authorities did not
provide an update on the status of the request where, for any reason, Saudi
Arabia had not been able to obtain and provide the information requested
within 90days of receipt of the request. The Saudi Arabian authorities report
that their internal procedures (manual) will be updated in this respect. Saudi
Arabia is recommended to provide status updates to its EOI partners within
90days where relevant, including in cases where it declined the EOI request.
Organisational process and resources (ToRC.5.2)

304. The Department of Zakat and Income Tax (DZIT) is the competent
authority of Saudi Arabia for exchange of information purposes. This department also has the powers to obtain information in this respect. The Department
of Policy and International Affairs, within DZIT, has the day-to-day responsibility for the exchange of information.

305. Within The Department of Policy and International Affairs, the
Exchange of Information Administration is a newly-established unit that has
the overall responsibility for handling exchange of information.
306. Out of the seven employees working within this department, about
three persons are, amongst other things, dealing with exchange of information (the EOI unit).
307. All international requests for information are handled and processed
by the EOI Unit. The EOI Unit is responsible for communication with the
other competent authorities and for the administration of gathering the
requested information. This includes checking whether the responses sent
by the regional branches include all the requested information and are in
the requested format, and, if the requested information cannot be provided,
ensuring that it provides an explanation as to why it was not able to provide
all the requested information.
Handling of EOI requests

308. When analysing the handling of EOI requests, it should first be noted
Saudi Arabias experience in exchange of information is fairly recent and
the volume of exchange of information has been limited. The EOI unit was
newly-established when the function of competent authority was shifted two
years ago from the Ministry of Finance to the international operations department within DZIT. In terms of timing this shift coincided with the retirement
of the official within the Ministry of Finance that had been responsible for
handling all EOI related issues up to then. No specific written procedures
existed and DZIT, in its role as the new Competent Authority, had to develop
instruction manuals for its different operations in respect of EOI. At this
moment written administrative procedures for processing incoming requests
for information, including an EOI manual, are still being prepared.
309. Saudi Arabia reports that the following procedures apply when a
request for information is received:

Once an EOI request is received the request will first be registered

in the EOI offices own internal registration database. A number of
key features will be entered into the database including the requesting jurisdiction, the subject of the request, the recipient of the request
and the date that the request was received. All documents are to be
scanned and included, while the originals are still being kept separately in a hand file. The system will then automatically produce a
registration number. The database enables the CA to log and track the
handling of a request within DZIT and its branches until the completion, answering and closure of the request. The system also enables
DZIT to trace all mails related to the case and specifics regarding
status and time-limits.
20.
As a second step one of the managers will allocate the request to one
of the officials in the EOI team that will be involved. The EOI official
will start with reviewing the request and the specific DTC or agreement to determine the validity of the request.
In case the request is found to be invalid, a response is to be prepared

showing the reason for invalidity of the request and that has to be
sent to the requesting jurisdiction. If the request is found to be valid,
the official involved will start collecting the requested information
(either from sources within DZIT or from external sources)along the
following lines:
-
Where information needed to respond to a request is already in

the hands of the tax authorities, the EOI official will obtain the
requested information from DZITs records and returns and the
request is answered. The standard time for this procedure is one
month. The EOI office only has access to some basic information related to the taxpayer such as address, TIN, branch. For full
access, the Audit Department within DZIT would get involved
to obtain the requested information from the database. The local
tax unit (the regional branch) will get involved if the requested
information relates to a taxpayer whose file is in that branch.
This would include information regarding zakat and tax returns,
accounting information, audits etc.;
In cases where the requested information is in the hands of

another governmental authority, the EOI official will get in touch
with the concerned government authority and the request is to be
answered within 90days. Based on administrative procedures
all government authorities within Saudi Arabia should answer to
requests for information that they make among themselves within
a period of 15days. DZIT officials further explain that DZIT
currently communicates with a growing number of ministries
via an electronic link.20 The idea is that this new system will
completely replace the traditional paper system which used to
link government agencies with each other. DZIT is currently able
to use this new system in its contacts with a number of government agencies and ministries, including the MCI, the Ministry
of Interior and they state that this facilitates access to specific
Saudi Arabia adds that a web service based application between MCI and DZIT
will be launched in March 2016 (latest) to automatically create a TIN for all
newly registered commercial entities.

sources of information (for instance the verification of information about PEs as well as the status of foreigners employed in
Saudi Arabia) as well as the speediness of the process in general;
In cases where the requested information is in the possession

or control of the taxpayer/person/entity that is the subject of
the enquiry, the EOI unit will contact the taxpayer or person
involved and request the information from the taxpayer/person/
entity in whose possession the information is. In most cases the
request will be forwarded to a regional branch of DZIT, and the
information will be collected by DZIT officials that are working
in the branch. If DZIT determines to examine the taxpayer to
obtain the requested information, the taxpayer will be informed
in a registered mail of the date of audit and of the records to be
made available for the audit team. The audit is carried out by
the audit staff of audit administrations of the Large Taxpayers
Admin or of the branches. Saudi Arabia reports that the audit
would normally start within a period of 30days from the date of
contact with the taxpayer. It further clarifies that the audit may
take from 1-15 work days, depending also on the scope of audit
and the size of the entity that is to be audited. In case the information is available, the request is to be answered within 90days;
In cases where the requested information is in the possession or

control of a third party such as a service provider, e.g.a trustee, the
EOI office will request the information from the party that has such
information. Saudi Arabia adds that if there is a need, they would
communicate with the regulatory government agency under whose
jurisdiction/supervision the service provider falls. In case the information is available, the request is to be answered within 180days;
In cases where the requested information is in the hands of

a bank, DZIT will ask the Saudi Arabian Monetary Agency
(SAMA). As Saudi Arabia explains SAMA will than forward
the request by entering it into an electronic system that links all
banks with SAMA. Once SAMA receives the answer (s) from
the bank (s), it will check the information to ensure that it is
complete, before it is sent to DZIT. On average it takes around
three weeks for SAMA to respond to an information request
from DZIT. DZIT states that it is able to reply to the requesting
jurisdiction within 90days after receiving the request.
Once the requested information is collected, the official in the EOI

unit will in all cases check the information that is gathered to ensure
that it is responsive to the EOI request. Following this, the official
will draft a response that goes with the requested information.
Once the manager approves the answer, it is signed and sent to the
requesting party by regular mail or electronic mail depending on the
request.
310. Although Saudi Arabia states that it implemented these organisational processes for EOI, it is clear that these processes were not functioning
or monitored during the period under review. In practice, Saudi Arabia did
not provide any feedback or replies in cases where it declined requests.
Furthermore, two cases are pending with branches of DZIT for more than
two years and no status updates or replies to reminders were sent. During
the onsite visit it was further noted that there is not a clear overview within
DZIT regarding the actual number of requests received and the processing
that takes place in respect of the pending requests. As a result, there was no
follow up in respect of the two requests that were pending for a longer period
of time.
311. As pointed out above, these shortcomings are complemented by various communication issues that impacted an effective and efficient EOI during
the review period. First there is a lack of effective communication following
the change of the Competent Authority contact details. This does not only
regard its communication with EOI partners which were generally not notified about this change, but also the contacts between DZIT and the Ministry
of Finance in respect of forwarding requests that still were being received by
the Ministry after function of the Competent Authority was moved to DZIT.
Moreover there was a lack of communication in respect of the requests that
did arrive with the EOI unit. From the 6cases that Saudi Arabia received only
one was actually responded to and the rest of the cases remained unanswered.
Several peers commented that they did not get any response from Saudi
Arabia in any of their cases. It is therefore recommended that Saudi Arabia
ensures that it has appropriate organisational processes in place to process
and answer to EOI requests in a timely manner.
Unreasonable, disproportionate or unduly restrictive conditions on

exchange of information (ToRC.5.3)
312. Exchange of information assistance should not be subject to unreasonable, disproportionate, or unduly restrictive conditions. Other than those
matters identified earlier in this report, there are no further conditions that
appear to restrict effective exchange of information in Saudi Arabia. In practice, there has been no case where any issue in this regard came up, and no
peers have raised any issues in this regard either.

This element involves issues of practice that are assessed in the
Phase2 review. Accordingly no Phase1 determination has been made.
Phase2 rating
Partially Compliant
Factors underlying
recommendations
Recommendations
Over the review period, Saudi Arabia

did not communicate a change in
its competent authority details to all
its treaty partners. As a result, out
of 9 requests sent during the review
period only 6 requests were received
by the EOI unit. In 3 of these cases,
Saudi Arabia initially did not provide
a response where it declined the EOI
request. Two cases are pending for
more than 2years. In these cases,
Saudi Arabia has not provided any
status updates during the review
period.
Saudi Arabia should communicate

regularly with all treaty partners.
Saudi Arabia should answer in cases
where it declined the EOI request
and provide status updates to its
EOI partners within 90days where
relevant.
During the review period, no clear

organisational processes were in
place, which led to EOI requests not
being processed in a timely manner.
Saudi Arabia should ensure that

it has appropriate organisational
processes in place to process and
answer to EOI requests in a timely
manner.
SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS 101
Summary of determinations and factors

underlyingrecommendations
Overall Rating
LARGELY COMPLIANT
Determination
Factors underlying
recommendations
Recommendations
Jurisdictions should ensure that ownership and identity information for all relevant entities
and arrangements is available to their competent authorities (ToR A.1)
The element is in place. Although a general obligation
exists for trustees and trust
administrators of foreign trusts
to identify their client under
AML/CFT legislation, no
clear guidance is provided on
what information needs to be
obtained.
Saudi Arabia should ensure

that ownership information on
foreign trusts with a trustee
or trust administrator in Saudi
Arabia is available in all cases.
Phase2 rating:
Compliant
Jurisdictions should ensure that reliable accounting records are kept for all relevant entities
and arrangements (ToR A.2)
The element is in place. Partnerships with a capital of
SAR100000 (EUR24159)
or less without foreign
partners are not expressly
required to keep underlying
documentation or to keep
documentation for at least
5years.

that all partnerships are
required to keep underlying
documentation and to keep
accounting records for a
period of at least 5years.
102 SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS
Determination
Phase2 rating:
Largely compliant
Factors underlying
recommendations
With a staff of only 5 persons
and with only half of the
audited accounting documents
being submitted to the MCI
in a timely way during the
period under review, there
were not sufficient safeguards
in place to ensure that
reliable accounting records
in practice were kept for
all relevant entities and
arrangements. Furthermore,
it appears that a significant
number of companies in
Saudi Arabia is not registered
with DZIT, although Saudi
Arabia indicated that the vast
majority of these are inactive.
Therefore, the oversight
that takes place by the tax
authorities in this respect
is only likely to cover part
of the relevant entities and
arrangements that should be
monitored by the MCI. It can
be noted, however, that MCI
already initiated a number of
important steps to enhance its
oversight activities, including
the hiring of an additional
100staff as well as the recent
introduction of a specific
database known as Qawaem,
to reduce the number of late
filings or non-filings.
Recommendations
Saudi Arabia should monitor
the recently introduced
oversight activities to ensure
that reliable accounting
records are kept for all relevant
entities and arrangements.
Banking information should be available for all account-holders (ToR A.3)

Phase2 rating:
Compliant
Determination
Factors underlying
recommendations
Recommendations
Competent authorities should have the power to obtain and provide information that is the
subject of a request under an exchange of information arrangement from any person within
their territorial jurisdiction who is in possession or control of such information (irrespective
of any legal obligation on such person to maintain the secrecy of the information) (ToR B.1)
The element is in
place, but certain
aspects of the legal
implementation of
the element need
improvement.
The compulsory powers

available to the Saudi Arabian
authorities to ensure that
information is obtained are
not designed to address
non-compliance with the
access powers used to obtain
information for EOI purposes.
Saudi Arabia should review

its powers for compelling
the provision of information
for EOI purposes in order to
ensure that non-compliance
with a request to provide
such information can be
appropriately addressed.
Phase2 rating:
Largely Compliant
Saudi Arabia was unable

to answer two requests
for information due to the
restrictions under its domestic
law and the applicable
EOI agreements. Although
the entry into force of the
Multilateral Convention will
bring the EOI relationship
with most of its EOI partners
in line with the standard, it
should be noted that Saudi
Arabia has little practical
experience in obtaining
information for EOI purposes
in general and in exchanging
banking information for EOI
purposes under bilateral EOI
agreements in particular
Saudi Arabia should monitor

that it exchanges bank
information and other types
of relevant information in
accordance with the standard
under the EOI agreements that
allow Saudi Arabia to obtain
information regardless of a
domestic tax interest provided
for by Saudi Arabias domestic
legislation.
The rights and safeguards (e.g.notification, appeal rights) that apply to persons in the
requested jurisdiction should be compatible with effective exchange of information (ToR B.2)
Phase2 rating:
Compliant
104 SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS
Determination
Factors underlying
recommendations
Recommendations
Exchange of information mechanisms should allow for effective exchange of information

(ToR C.1)
Phase2 rating:
Compliant
The jurisdictions network of information exchange mechanisms should cover all relevant
partners (ToR C.2)
The element is in
place, but certain
aspects of the legal
implementation of
the element need
improvement.
Some delays have been

experienced in Saudi Arabia
responding to requests from
other jurisdictions to start
negotiations with a view to
enter into an information
exchange agreement.
Saudi Arabia should,

expeditiously, enter into
agreements for exchange of
information (regardless of their
form) with all relevant partners,
meaning those partners who
are interested in entering
into an information exchange
arrangement with it.
Phase2 rating:
Largely compliant
The jurisdictions mechanisms for exchange of information should have adequate provisions
to ensure the confidentiality of information received (ToR C.3)
Phase2 rating:
Compliant.
The exchange of information mechanisms should respect the rights and safeguards of
taxpayers and third parties (ToR C.4)
Phase2 rating:
Compliant.
The jurisdiction should provide information under its network of agreements in a timely
manner (ToR C.5)
This element involves
issues of practice
that are assessed in
the Phase2 review.
Accordingly no
has been made.
Determination
Phase2 rating:
Partially compliant
Factors underlying
recommendations
Recommendations
Over the review period, Saudi

Arabia did not communicate
a change in its competent
authority details to all its treaty
partners. As a result, out of
9 requests sent during the
review period only 6 requests
were received by the EOI unit.
In 3 of these cases, Saudi
Arabia initially did not provide
a response where it declined
the EOI request. Two cases
are pending for more than
2years. In these cases, Saudi
Arabia has not provided any
status updates during the
review period.
Saudi Arabia should

communicate regularly with all
treaty partners. Saudi Arabia
should answer in cases where
it declined the EOI request and
provide status updates to its
EOI partners within 90days
where relevant.
During the review period, no

clear organisational processes
were in place, which led to EOI
requests not being processed
in a timely manner.

that it has appropriate
organisational processes in
place to process and answer
to EOI requests in a timely
manner.
ANNEXES 107
Annex1: Jurisdictions response to the review report21

Since the inception of the Global Forum (GF) in its current form, as a
member Saudi Arabia actively participates in its work. Aside from complying with the international standards, which are promoted, monitored, and
assessed by the GF, Saudi Arabia supports the work of the GF by participating in all of the key meetings and the policy making decisions. We have went
an extra mile in our support by assigning one of our staff to work with the
GF, and another one to work with the GF as an expert assessor.Saudi Arabia
would like to express its appreciation for the assessment team for their professional work and excellent cooperation during the Phase2 Peer review
process. It was a great pleasure to work with such professional and experienced assessors. Saudi Arabia also would like to thankthe Peer Review Group
and member countries for their inputs, comments, and questions.During the
Peer review process of the completed phase 1 and the current phase 2 we have
studied a lot of issues and gained valuable experience. We believe that our
mutual contributions will lead to full compliance with the standards of transparency and exchange of information. Our country looks at compliance with
the standards of transparency and exchange of information as a matter of a
national need as well as a commitment toward other jurisdictions.We believe
that the assessment team has tried to make its recommendations as objective
and complete as possible and we are in full agreement with the determinations and ratingsAs pointed out in the report, Saudi Arabia has a network
of Double Taxation Conventions covering 43 jurisdictions, with a few more
being negotiated. In addition, Saudi Arabia also signed the Convention on
Mutual Administrative Assistance in Tax Matters, as amended, ratified it
and deposited its instrument of ratification last year. This will provide Saudi
Arabia with an EOI network that covers a total of over 100 jurisdictions.
These agreements, as well as the Multilateral Convention, all contain provisions that would, in principle, allow the contracting parties to exchange all
relevant information.We have started to up-date the small number of effective
agreements that do not fulfill the standard. Hopefully, the partners to these
21.
This Annex presents the jurisdictions response to the review report and shall not
be deemed to represent the Global Forums views.
108 ANNEXES
agreements are willing and cooperative to expedite this up-date process.
We believe that considering all Saudi Laws that are effective, and with the
DTAs and the Multilateral Convention being enacted in the domestic laws
per Royal Decrees, the competent authority of Saudi Arabia has all powers
it needs to have effective exchange of information according to the Forums
standards with other jurisdictions.We look forward to enhancing cooperation
in the transparency and exchange of information for tax purposes with other
jurisdictions.
Thank you
ANNEXES 109
Annex2: List of all exchange-of-information mechanisms

inforce
Exchange of information agreements signed by Saudi Arabia as at
17December 2015.
Saudi Arabia ratified the Multilateral Convention and deposited its
Jurisdiction
Type of EOI
arrangement
Date signed
Date in force
Albania
Multilateral Convention
Signed
In force in Albaniaa
Algeria
DTC
18 august 2014
Not yet in force
Andorra
Signed
Not yet in force
Anguillab
Extended
In force in Anguillaa
Argentina
Signed
In force in
Argentinaa
Arubac
Extended
In force in Arubaa
Australia
Signed
In force in Australiaa
Austria
DTC
19March 2006
1June 2007
Signed
In force in Austriaa
DTC
13May 2014
1May 2015
Azerbaijan
Signed
In force in
Azerbaijana
10
Bangladesh
11
Barbados
DTC
4January 2011
1October 2011
28October 2015
Not yet in force
12
Belarus
DTC
20July 2009
1August 2010
13
Belgium
Signed
In force in Belgiuma
14
Belize
Signed
In force in Belizea
15
Bermudab
Extended
In force in Bermudaa
110 ANNEXES
Jurisdiction
Type of EOI
arrangement
Date signed
Date in force
16
Brazil
Signed
Not yet in force
17
British Virgin
Islandsb
Extended
In force in British
Virgin Islandsa
18
Bulgaria
26October 2015
Not yet in force
19
Cameroon
Signed
In force in
Cameroona
20 Canada
Signed
In force in Canadaa
21
Extended
In force in Cayman
Islandsa
Signed
Not yet in force
Cayman Islandsb
22 Chile
23
China, Peoples
Republic of
DTC
23June 2006
1October 2006
Signed
Not yet in forcea, e
24
Colombia
Signed
In force in
Colombiaa
25 Costa Rica
Signed
In force in Costa
Ricaa
26 Croatia
Signed
In force in Croatiaa
27 Curaaoc
Extended
In force in Curaaoa
28 Cyprus
Signed
In force in Cyprusa
DTC
25April 2012
1May 2013
Signed
In force in Czech
Republica
30 Denmark
Signed
In force in
Denmarka
31
29 Czech Republic
Signed
Not yet in force
32 Estonia
El Salvador
Signed
In force in Estoniaa
33 Ethiopia
DTC
28February 2013
Not yet in force
34 Faroe Islandsd
Extended
In force in Faroe
Islandsa
35 Finland
Signed
In force in Finlanda
DTC
18February 1982
1March 1983
36 France
Protocol
18February 2011
1June 2012
Signed
In force in Francea
ANNEXES 111
Type of EOI
arrangement
Date signed
Date in force
DTC
15 Dec. 2014
Not yet in force
DTC
17 Dec 2015
Not yet inforce
Signed
Not yet in force
39 Georgia
Signed
In force in Georgiaa
40 Germany
Signed
In force in Germanya
41
Ghana
Signed
In force in Ghanaa
42
Gibraltarb
Extended
In force in Gibraltara
DTC
19June 2008
1May 2010
Signed
In force in Greecea
44 Greenlandd
Extended
In force in
Greenlanda
45 Guatemala
Signed
Not yet in force
46 Guernseyb
Extended
In force in
Guernseya
Jurisdiction
37
Former Yugoslav
Republic of
Macedonia
38 Gabon
43 Greece
47
Hungary
48 Iceland
49 India
50 Indonesia
51
Ireland
52
Isle of Manb
53 Italy
54 Japan
55 Jersey
56 Kazakhstan
DTC
24March 2014
1May 2015
Signed
In force in Hungarya
Signed
In force in Icelanda
DTC
25January 2006
1November 2006
Signed
In force in Indiaa
Signed
In force in Indonesiaa
DTC
19October 2011
1 Dec. 2012
Signed
In force in Irelanda
Extended
In force in Isle of
Mana
DTC
13January 2007
1December 2009
Signed
In force in Italy
DTC
15November 2010
1September 2011
Signed
In force in Japana
Extended
In force in Jerseya
DTC
7June 2011
Not in force
Signed
In force in
Kazakhstana
112 ANNEXES
Type of EOI
arrangement
Date signed
Date in force
DTC
24March 2007
1December 2008
Signed
In force in Koreaa
DTC
2December 2014
1October 2015
59 Latvia
Signed
In force in Latviaa
60 Liechtenstein
Signed
Not yet in force
61
Signed
In force in
Lithuaniaa
DTC
7May 2013
1September 2014
Signed
In force in
Luxembourga
DTC
31January 2006
1July 2007
DTC
4January 2012
1December 2012
Signed
In force in Maltaa
65 Mauritius
Signed
In force in
Mauritiusa
66 Mexico
Signed
In force in Mexicoa
67
Moldova
Signed
In force in Moldovaa
68 Monaco
Signed
Not yet in force
69 Montserratb
Extended
In force in
Montserrata
DTC
14April 2015
Not yet in force
Jurisdiction
57 Korea
58 Kyrgyzstan
Lithuania
62 Luxembourg
63 Malaysia
64 Malta
70
Morocco
Signed
Not yet in force
DTC
13October 2008
1December 2010
Signed
In force in
Netherlandsa
71
Netherlands
72
New Zealand
Signed
In force in New
Zealanda
73
Nigeria
Signed
In force in Nigeriaa
74
Norway
Signed
In force in Norwaya
75
Pakistan
76
Philippines
77 Poland
DTC
2February 2006
1December 2006
Signed
Not yet in force
DTC
22February 2011
1June 2012
Signed
In force in Polanda
ANNEXES 113
Type of EOI
arrangement
Date signed
Date in force
DTC
8April 2015
Not yet in force
Signed
In force in Portugala
DTC
26April 2011
1July 2012
Signed
In force in
Romaniaa
DTC
11February 2007
1February 2010
Signed
In force in Russian
Federationa
Signed
In force in San
Marinoa
Signed
In force in the
Seychellesa
DTC
3May 2010
1July 2011
Signed
Not yet in force
84 Sint Maartenc
Extended
In force in Sint
Maartena
85 Slovak Republic
Signed
In force in Slovak
Republica
86 Slovenia
Signed
In force in Sloveniaa
DTC
13March 2007
1May 2008
Signed
In force in South
Africaa
DTC
19June 2007
1October 2008
Signed
In force in Spaina
DTC
7October 2009
1October 2010
DTC
19October 2015
Not yet in force
Signed
In force in Swedena
Signed
Not yet in force
DTC
13May 2014
1June 2015
Jurisdiction
78
79
Portugal
Romania
80 Russian Federation
81
San Marino
82 Seychelles
83 Singapore
87
South Africa
88 Spain
89 Syria
90 Sweden
91
Switzerland
92 Tajikistan
93 Tunisia
94 Turkey
Turks and Caicos
95
Islandsb
DTC
8July 2010
1April 2013
Signed
In force in Tunisiaa
DTC
9November 2007
1April 2009
Signed
Not yet in force
Extended
In force in Turks
and Caicos Islandsa
114 ANNEXES
Jurisdiction
96 Uganda
Type of EOI
arrangement
Date signed
Multilateral Convention 4November 2015
Date in force
Not yet in force
DTC
2September 2011
1 Dec. 2012
Signed
In force in Ukrainea
DTC
31October 2007
1January 2009
Signed
In force in United
Kingdoma
Signed
Not yet in force
100 Uzbekistan
DTC
18November 2008
1November 2010
101 Venezuela
DTC
11November 2015
Not yet inforce
102 Viet Nam
DTC
10April 2010
1February 2011
97
Ukraine
98 United Kingdom
99 United States
Notes: a. It will enter into force on 1April 2016.

b. Extension by the United Kingdom.
c. Extension by the Kingdom of the Netherlands.
d. Extension by the Kingdom of Denmark.
e. China deposited its instrument of ratification on 16October 2015, and the Multilateral
Convention will enter into force in China on 1February 2016.
f. Footnote by Turkey: The information in this document with reference to Cyprus relates
to the southern part of the Island. There is no single authority representing both Turkish and
Greek Cypriot people on the Island. Turkey recognises the Turkish Republic of Northern
Cyprus (TRNC). Until a lasting and equitable solution is found within the context of United
Nations, Turkey shall preserve its position concerning the Cyprus issue.
Footnote by all the European Union Member States of the OECD and the European Union:
The Republic of Cyprus is recognised by all members of the United Nations with the
exception of Turkey. The information in this document relates to the area under the effective
control of the Government of the Republic of Cyprus.
ANNEXES 115
Annex3: List of all laws, regulations and other material

consulted
Commercial laws
Companies Law
Commercial Books law
Commercial Register Law
Implementing Regulations of By-Law of Philanthropic Associations and
Organisations
Law of Commercial Court (excerpts)
Waqf Organisation By-Law
Financial sector laws

AML/CFT Guidelines for banks and money exchangers
Anti-Money Laundering Law
Banking Control Law
Capital Market Law
Foreign Investment Law
Taxation laws
Income Tax Law
Income Tax Regulations
Zakat Law
Zakat Regulations
116 ANNEXES
Other laws
Basic Law (Constitution)
Certified Public Accountants Regulations
Code of Law Practice
ANNEXES 117
Annex 4: Persons interviewed during the on-site visit

During the on-site visit, the assessment team met with officials and
representatives of the Ministry of Finance and the Department of Zakat and
Income Tax (DZIT), as well as representatives of the Ministry of Commerce
and Industry, the Ministry of Justice, the Ministry of Islamic Affairs, as
well as representatives of the Saudi Arabian Monetary Agency (SAMA)
and the Ministry of Foreign affairs, as well as representatives of local Waqf
Administration.
ORGANISATION FOR ECONOMIC CO-OPERATION

AND DEVELOPMENT
The OECD is a unique forum where governments work together to address the
economic, social and environmental challenges of globalisation. The OECD is also at the
forefront of efforts to understand and to help governments respond to new developments and
concerns, such as corporate governance, the information economy and the challenges of an
ageing population. The Organisation provides a setting where governments can compare
policy experiences, seek answers to common problems, identify good practice and work to coordinate domestic and international policies.
The OECD member countries are: Australia, Austria, Belgium, Canada, Chile, the Czech
Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel,
Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland,
Portugal, the Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, the United Kingdom
and the United States. The European Union takes part in the work of the OECD.
OECD Publishing disseminates widely the results of the Organisations statistics gathering
and research on economic, social and environmental issues, as well as the conventions,
guidelines and standards agreed by its members.
OECD PUBLISHING, 2, rue Andr-Pascal, 75775 PARIS CEDEX 16

(23 2016 10 1 P) ISBN 978-92-64-25088-8 2016
Global Forum on Transparency and Exchange ofInformation

forTax Purposes
PEER REVIEWS, PHASE 2: SAUDI ARABIA

This report contains a Phase 2: Implementation of the Standards in Practice review, as well
as revised version of the Phase 1: Legal and Regulatory Framework review already released
for this country.
The Global Forum on Transparency and Exchange of Information for Tax Purposes is the
multilateral framework within which work in the area of tax transparency and exchange of
information is carried out by over 130 jurisdictions which participate in the work of the
Global Forum on an equal footing.
The Global Forum is charged with in-depth monitoring and peer review of the implementation
of the standards of transparency and exchange of information for tax purposes. These
standards are primarily reflected in the 2002 OECD Model Agreement on Exchange of
Information on Tax Matters and its commentary, and in Article 26 of the OECD Model Tax
Convention on Income and on Capital and its commentary as updated in 2004, which has
been incorporated in the UN Model Tax Convention.
The standards provide for international exchange on request of foreseeably relevant
information for the administration or enforcement of the domestic tax laws of a requesting
party. Fishing expeditions are not authorised, but all foreseeably relevant information must
be provided, including bank information and information held by fiduciaries, regardless of the
existence of a domestic tax interest or the application of a dual criminality standard.
All members of the Global Forum, as well as jurisdictions identified by the Global Forum as
relevant to its work, are being reviewed. This process is undertaken in two phases. Phase 1
reviews assess the quality of a jurisdictions legal and regulatory framework for the exchange
of information, while Phase 2 reviews look at the practical implementation of that framework.
Some Global Forum members are undergoing combined Phase 1 plus Phase 2 reviews.
The ultimate goal is to help jurisdictions to effectively implement the international standards
of transparency and exchange of information for tax purposes.
All review reports are published once approved by the Global Forum and they thus represent
agreed Global Forum reports.
For more information on the work of the Global Forum on Transparency and Exchange of
Information for Tax Purposes, and for copies of the published review reports, please visit
www.oecd.org/tax/transparency and www.eoi-tax.org.
Consult this publication on line at http://dx.doi.org/10.1787/9789264250895-en.

This work is published on the OECD iLibrary, which gathers all OECD books, periodicals and
statistical databases.
Visit www.oecd-ilibrary.org for more information.
ISBN 978-92-64-25088-8
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GLOBAL FORUM ON TRANSPARENCY AND EXCHANGE

OF INFORMATION FOR TAX PURPOSES

Peer Review Report

This work is published on the responsibility of the Secretary-General of the OECD.

ISBN 978-92-64-25088-8 (print)

Corrigenda to OECD publications may be found on line at: www.oecd.org/publishing/corrigenda.

About the Global Forum  5

PEER REVIEW REPORT PHASE 2 SAUDI ARABIA OECD 2016

PEER REVIEW REPORT PHASE 2 SAUDI ARABIA OECD 2016

ABOUT THE GLOBAL FORUM 5

About the Global Forum

PEER REVIEW REPORT PHASE 2 SAUDI ARABIA OECD 2016

PEER REVIEW REPORT PHASE 2 SAUDI ARABIA OECD 2016

PEER REVIEW REPORT PHASE 2 SAUDI ARABIA OECD 2016

PEER REVIEW REPORT PHASE 2 SAUDI ARABIA OECD 2016

PEER REVIEW REPORT PHASE 2 SAUDI ARABIA OECD 2016

PEER REVIEW REPORT PHASE 2 SAUDI ARABIA OECD 2016

PEER REVIEW REPORT PHASE 2 SAUDI ARABIA OECD 2016

Overview of Saudi Arabia

PEER REVIEW REPORT PHASE 2 SAUDI ARABIA OECD 2016

World CIA Factbook https://www.cia.gov/library/publications/the-world-factbook/

PEER REVIEW REPORT PHASE 2 SAUDI ARABIA OECD 2016

Investment and financial sector

PEER REVIEW REPORT PHASE 2 SAUDI ARABIA OECD 2016

Law. The banking sector comprises 12 domestic banks and 12 branches of

Taxation and international cooperation

Persons subject to income tax are:

Companies resident in Saudi Arabia to the extent of the participation

Individuals who are non-Saudi citizens but resident in Saudi Arabia

PEER REVIEW REPORT PHASE 2 SAUDI ARABIA OECD 2016

PEER REVIEW REPORT PHASE 2 SAUDI ARABIA OECD 2016

PEER REVIEW REPORT PHASE 2 SAUDI ARABIA OECD 2016

PEER REVIEW REPORT PHASE 2 SAUDI ARABIA OECD 2016

Compliance with the Standards: Availability of information 21

Compliance with the Standards

PEER REVIEW REPORT PHASE 2 SAUDI ARABIA OECD 2016

22 Compliance with the Standards: Availability of information

PEER REVIEW REPORT PHASE 2 SAUDI ARABIA OECD 2016

Compliance with the Standards: Availability of information 23

PEER REVIEW REPORT PHASE 2 SAUDI ARABIA OECD 2016

24 Compliance with the Standards: Availability of information

A.1. Ownership and identity information

The following main types of companies can be distinguished:

PEER REVIEW REPORT PHASE 2 SAUDI ARABIA OECD 2016

Compliance with the Standards: Availability of information 25

PEER REVIEW REPORT PHASE 2 SAUDI ARABIA OECD 2016

26 Compliance with the Standards: Availability of information

Ownership information held by the authorities

PEER REVIEW REPORT PHASE 2 SAUDI ARABIA OECD 2016

Compliance with the Standards: Availability of information 27

PEER REVIEW REPORT PHASE 2 SAUDI ARABIA OECD 2016

28 Compliance with the Standards: Availability of information

Tax and zakat law

PEER REVIEW REPORT PHASE 2 SAUDI ARABIA OECD 2016

Compliance with the Standards: Availability of information 29

registered taxpayers (Individuals): 4342

registered taxpayers (Companies): 6864

registered zakat payers (Individuals): 248679

registered zakat payers (Companies): 19990

PEER REVIEW REPORT PHASE 2 SAUDI ARABIA OECD 2016

30 Compliance with the Standards: Availability of information

Limited liability companies

Joint stock companies

About the Global Forum 5