Why Saudi Arabia Has Yet to Commit to Pillar 2 Rules

 

 

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Saudi Arabia, a prominent member of the OECD's Inclusive Framework on BEPS, has not yet announced plans to implement the global Pillar 2 rules. Despite its active participation in international tax discussions, the Kingdom appears to be taking a cautious approach. Here are some potential reasons:

• Complexity of Implementation: Significant changes to the existing tax infrastructure are required, which can be complex and time consuming.

• Economic Considerations: KSA is likely assessing the economic impact of Pillar 2 rules, especially given its reliance on oil revenues and the need for economic diversification.

• Legislative Process: Enacting new tax laws involves a lengthy legislative process with multiple stages of review and approval.

• Coordination with Other Policies: Ensuring a cohesive approach by coordinating Pillar 2 rules with other economic and tax policies.

• Technical and Administrative Challenges: Aligning new tax regulations with existing systems and ensuring compliance can present significant challenges.

• International Negotiations: Ongoing discussions within the Inclusive Framework may influence the timing of implementation.

• Stakeholder Consultation: Extensive consultations with businesses and tax professionals to gather feedback and ensure smooth implementation.

Additionally, there could be external influences at play. For instance, the United States might be influencing KSA's decision-making process. In 2024, US investments in KSA have increased tremendously, which could be a factor. But why not just issue a local DMTT, as other GCC countries have done?

These factors highlight the complexity and strategic considerations involved in implementing Pillar 2 rules in KSA. The specific details will depend on the Kingdom's internal priorities and strategic goals.

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