In brief:
- The US and Saudi Arabia have signed a formal Tax Information Exchange Agreement.
- Banking, ownership, and full beneficial interest chain information must now be shared on request.
The Agreement for the Exchange of Information on Tax Matters has been signed between the US and the Kingdom of Saudi Arabia. It facilitates the exchange of information relevant to the administration and enforcement of the domestic tax laws of both states, including the determination, assessment, collection, recovery, and enforcement of tax claims, as well as the investigation or prosecution of tax matters.
Under the Agreement, either state may request information from the other for tax administration and enforcement purposes, regardless of whether the requested state needs the information for its own tax purposes or whether the conduct being investigated would constitute a crime under its laws.
The Agreement covers a broad range of taxes: on the US side, federal income taxes, employment and self-employment taxes, estate and gift taxes, and excise taxes; and on the Saudi side, income tax, zakat, VAT, and excise tax. Both states are obliged to obtain and provide information held by banks, financial institutions, and persons acting in an agency or fiduciary capacity, as well as information regarding the ownership of companies, partnerships, trusts, and foundations, including full ownership chain information.
In addition to on-request exchanges, the Agreement provides for automatic and spontaneous exchange of information. All information received must be treated as confidential and disclosed only to authorities involved in the assessment, collection, administration, enforcement, or prosecution of the taxes covered. The Agreement enters into force one month after Saudi Arabia notifies the United States through diplomatic channels that its internal procedures are complete, with retrospective effect from 1 January of the third year preceding entry into force.
This Agreement represents a significant development. The US has long sought to strengthen international frameworks to combat tax evasion and improve fiscal transparency, and bringing Saudi Arabia – a major financial centre and home to substantial sovereign and private wealth – into a formal information-sharing arrangement fills a meaningful gap. The breadth of taxes covered, combined with the obligation to share banking, ownership, and beneficial interest information, substantially reduces the potential for individuals and entities to exploit the bilateral relationship for tax avoidance purposes. The combination of on-request, automatic, and spontaneous exchange mechanisms, together with the retrospective application, gives both states robust and flexible tools for tax enforcement.