Business Valuation Standards and Regulations in Saudi Arabia

Business valuation Standards are the guidelines that are set to ensure uniformity, exactness, and integrity in business valuations, and Saudi Arabia stands at the convergence of global valuation practice and a rapidly revolutionizing regulatory environment. Over the last couple of years, KSA has assembled institutional structures, elevated international standards, and issued sector-specific legislations that evolve how businesses are judged for transactions, listings, tax, dispute resolving, and internal reporting. These Standards set the framework of methods, steps, and professional ethics that shape how appraisers determine a company’s real value. This blog comprehends the current Saudi legal structures, standards, and methods used by valuers, the role of authorities, and the best strategies for effective valuations in Saudi Arabia.

The Need for Business Valuation Services in Saudi Arabia

The Saudi financial market has transformed completely with privatizations and partial IPOs of state assets, frequent M&A, cross-border investments, and shifting tax and transfer pricing rules, reflecting those valuations are no longer just guidelines but an absolute necessity to ensure compliance, capital building, and intelligent planning. These standards are set by professional organizations, such as in KSA, they are mainly looked after by Taqeem, CMA, ZATCA, SOCPA, and IVSC. If a business misses the mark of fulfilling these mandatory requirements, the chances of tax disputes, fines, and arbitration tribunals also increase. Hence, the regulators highly focus on elevating valuer accreditation, aligning local practice with international standards, and presenting guidance where valuation impacts the public outcomes.

The Main Regulators and Standard-Setters of Business Valuation in KSA

1.     Saudi Authority for Accredited Valuers — TAQEEM

Taqeem is the legal entity that was created to manage, accredit, and regulate the valuation profession. It sets values and measures for valuers, registration process, licensing requirements, publisher rules, and sectoral guidelines, and also promotes professional development. Any Valuer who is overseeing official valuations for a regulated purpose must work as per the standards set by Taqeem. Additionally, Taqeem also encourages the adoption of international valuation standards and runs training programs to facilitate boosting the quality of valuations.

2.     Capital Market Authority (CMA)

The Capital Market Authority looks after the securities market, and it needs advanced valuation practices in contexts like public offerings (IPOs), pre-listing fairness opinions, squeeze-outs, cross-border offers, and some corporate actions. The CMA regulations set the limits of minimum disclosure and the due diligence expectations and where a business will require a complete valuation. CMA acknowledges independent, well-documented, and systematic aligned valuations built by experts. CMA also consistently updates the legislation according to modern-day market practices.

3.     Zakat, Tax and Customs Authority (ZATCA)

Tax regulations play a pivotal role in building a strong economic foundation of any country, and Zakat, Tax and Customs Authority in KSA takes the authority of setting rules that require valuation proof, like valuation of related party transactions, intangible assets, business restructuring, or intangible assets. The transfer pricing laws that are authorized by ZATCA and the documentation expectations oftentimes need valuations to assist arm’s length pricing and allotment of income among the associated entities. ZATCA has been modifying its TP rules for better clarity and certainty, and these rules also impact the practices and documentation quality that is expected from the taxpayers for compliance.

4.     The Saudi Organization for Chartered and Professional Accountants (SOCPA)

SOCPA is mainly responsible for governing accounting and reporting standards in Saudi Arabia. The adoption of International Financial Reporting Standards (IFRS) in KSA and the improved local implementations highly influence how the assets, impairments, and business combinations are planned, and these valuations are also necessary to support the accounting entries like fair value measurement under IFRS 13, impairment testing under IAS 36, or purchase price allocation under IFRS 3. SOCPA works beyond just accounting standards and professional ethics, but its certified standards and guidance are an essential factor in elevating valuation practice.

5.     International Valuation Standards Council (IVSC)

IVSC is not a legal Saudi regulator, but still acts as a global benchmark that impacts International Valuation Standards (IVS) across the globe. Saudi legal authorities and Taqeem explicitly reference IVS as the legal standard that many accredited valuers are mandated to follow, specifically where the cross-border comparability and internationally accepted methodologies are necessary. Staying in line with IVS offers both technical rigor and internal acceptance.

Core Standards and Guidance for Business Valuations in Saudi Arabia

Saudi Regulations are overseen by the local and international bodies to make sure that the legal guidelines are transparent, in line with global standards, and compliant.

• Taqeem Regulations: It defines who oversees the valuations, offers a professional standard to conduct conflicts of interest checks, and provides transparent methods.
• International Valuation Standards (IVS): Suggest globally used standards for the valuation bases, reporting, and classification of assets, which are widely utilized for facing investors or dealing with cross-border valuations
• IFRS and SOCPA Standards: They are applied when valuation supports financial reporting to make sure of compliance with fair value and disclosure needs
• CMA Rules: It instructs valuations for IPOs, market listings, and related party transactions, and prioritizes due diligence and complete revelation
• ZATCA Guidelines: ZATCA governs valuations, which impact transfer pricing and tax compliance. It needs defensible methods and documents for audits or APAs

Accepted Valuation Approaches and Local Practice

The Saudi Valuers highly motivate the three accepted global approaches, which include income, market, and cost; these are calculated as per local market judgments.

1. Income Approach (Discounted Cash Flow- DCF): This is mainly utilized for the purpose of business valuation, where cash flows can be formalized. Authorities motivate a healthy construction of cashflow forecasts, the explanation of growth and terminal value assumptions, and the right selection of discount rates.
2. Market Approach: This is beneficial where there are reliable, arm’s length transactions comparable to or recorded peer multiples. In the Saudi Markets, the opportunity of comparable transactions is limited only to some areas, so it needs accurate selection and adjustment.
3. Cost Approach: This is mainly used for tangible assets valuations or where a business is valued on the basis of its liquidation or reconstruction. This is not very common for advantageous enterprise valuation until the assets surpass the enterprise’s worth.

Common Regulatory Pain Points and Disputes

• Unclear Forecast: When a company overoptimizes its forecast that doesn’t align with the past performance of the company and market trends, then it raises questions from regulators. Valuers are required to prove their assumptions using their current situation, historical data, and market trends. This aids in proving that a company can actually achieve the future projections
• Miscalculated or unclear Discount Rates: One of the most common reasons for dispute is the discount rate, which is used to compute the present worth. If it is not well calculated or doesn’t reflect the company’s risks, companies can be exposed to queries and penalties from regulators. Hence, every component must be fully elaborated along with market risk, capital structure, and true country-specific adjustments.
• Poor Selection of Comparable: When Valuers use companies that are not actually alike, the valuation credibility becomes low. It is therefore necessary to document why the comparable company was picked, and cross-check outcomes using multiple approaches.
• Independence Issues: If any valuer is connected to the business or its owners, the report can become untrustworthy. Most of the regulators favor Taqeem-accredited valuers who include written verifications to show objectivity and to guard from conflict of interest
• Valuing intangibles for Tax Purposes: Intangible assets like brands or software are not very easy to value. ZATCA now demands strict and proficient benchmarking and documentation as proof that valuations are based on authentic expectations and applicable transfer pricing methods.

Important Strategies for Companies and Advisors

• Prefer hiring a Taqeem-accredited expert at the start of IPO, Merger, or major restructuring. With early involvement, it saves from any unexpected last-minute complexities
• Use different methods of calculations to strengthen your credibility. Regulatory bodies prefer cross-checked and well-reasoned analysis.
• Keep a thorough record, including all paperwork with assumptions, calculations, and sensitivity tests. It must demonstrate how the values change with distinct inputs, which helps to build trust and clarity.
• Follow the regulatory requirements provided by CMA, ZATCA, and others accurately and review them early to save time, money, and to mitigate the risks of non-compliance or even rejection in some cases.

How SS&CO Facilitates Compliance with Business Valuation Standards

SSCOKSA is one of the leading accounting and tax services providers that offers business valuation services in Saudi Arabia. Our team works alongside Taqeem-accredited valuers and promises that your valuations will be completely aligned with local and international standards, such as IVS, IFRS, CMA, and ZATCA. We are well-trusted by our clients since we offer:

• Adherence to global standards like IVS and IFRS
• Collaboration with accredited Valuers to meet the local needs
• Complete documentation to justify all assumptions, comparable models
• Maintaining fairness to protect the company from conflicts of interest in every engagement
• Assisting businesses through customized solutions with practical and data-driven solutions

With our expert insight, we deliver valuations that are built on trust, tested by audits, and approved by regulators to give you confidence to lead in the market.