Saudi Arabia

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Overall Phase 2 Rating is Largely Compliant

Table of Determinations and Ratings of the Phase 2 Review

Jurisdictions should ensure that ownership and identity information for all relevant entities and arrangements is available to their competent authorities. (ToR A.1)
Determination Factors Recommendations
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. 
Phase 2 Rating Factors Recommendations
Compliant.     
Jurisdictions should ensure that reliable accounting records are kept for all relevant entities and arrangements. (ToR A.2)
Determination Factors Recommendations
The element is in place.   Partnerships with a capital of SAR 100 000 (EUR 24 159) or less without foreign partners are not expressly required to keep underlying documentation or to keep documentation for at least 5 years.  Saudi Arabia should ensure that all partnerships are required to keep underlying documentation and to keep accounting records for a period of at least 5 years. 
Phase 2 Rating Factors Recommendations
Largely Compliant.  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 100 staff 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. 
Banking information should be available for all account-holders. (ToR A.3)
Determination Factors Recommendations
The element is in place.      
Phase 2 Rating Factors Recommendations
Compliant.     
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)
Determination Factors Recommendations
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. 
Phase 2 Rating Factors Recommendations
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 Arabia’s 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)
Determination Factors Recommendations
The element is in place.      
Phase 2 Rating Factors Recommendations
Compliant.     
Exchange of information mechanisms should provide for effective exchange of information. (ToR C.1)
Determination Factors Recommendations
The element is in place.      
Phase 2 Rating Factors Recommendations
Compliant.     
The jurisdictions' network of information exchange mechanisms should cover all relevant partners. (ToR C.2)
Determination Factors Recommendations
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. 
Phase 2 Rating Factors Recommendations
Largely Compliant.     
The jurisdictions' mechanisms for exchange of information should have adequate provisions to ensure the confidentiality of information received. (ToR C.3)
Determination Factors Recommendations
The element is in place.      
Phase 2 Rating Factors Recommendations
Compliant.     
The exchange of information mechanisms should respect the rights and safeguards of taxpayers and third parties. (ToR C.4)
Determination Factors Recommendations
The element is in place.      
Phase 2 Rating Factors Recommendations
Compliant.     
The jurisdiction should provide information under its network of agreements in a timely manner. (ToR C.5)
Determination Factors Recommendations
The assessment team is not in a position to evaluate whether this element is in place, as it involves issues of practice that are dealt with in the Phase 2 review.      
Phase 2 Rating Factors Recommendations
Partially Compliant.  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 2 years. 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 90 days 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. 

Earlier self-assessment based annual reports entitled Tax Co-operation 2010: Towards a Level Playing Field are also available.