2022 Iktva Guideline - Final Version 7.30.23

Calculation Guide
In-Kingdom Total Value Add (iktva)
iktva Certification | 2023
Saudi Aramco: Company General Use

Objective of This Guideline
This guideline provides the user with the procedure to accurately calculate
iktva, in addition to a breakdown of the details pertaining to each iktva
component.
2
Table of Contents
iktva Goals 4
iktva Formula Overview 4
General Instructions 5
Component A 12
Component B 19
Component C 22
Component D 27
Component R 31
Component E 35
Component I 39
3
iktva Goals
The goals of iktva is to improve reliability and develop globally competitive industrial base.
70% Increase Thousands

Local Content Exports Jobs
iktva Formula Overview

𝐴+𝐵+𝐶+𝐷+𝑅
𝑖𝑘𝑡𝑣𝑎 = ( )+𝐼
𝐸
Includes full details about local Goods & Services, Amortization &
Component A Depreciation of Invested CAPEX and Right of Use assets, and Expat
Compensation
Component B Saudi Workforce Compensation
Component C Training & Development of Saudis
Component D Local Supplier Development
Component R Local Research & Development
Component E Total Costs
Component I Includes Incentives: Exports, Environment Social Governance,

Cybersecurity, Regional Headquarter Program
4
General Instructions
Financials:
Companies will receive scores at two levels: Saudi Aramco level & Kingdom level.
All financial figures should be reported in United States Dollars (USD).
Reported figures shall correspond to the company’s audited fiscal year-end financial
statements. If a company changes its fiscal year-end, it should consult with Saudi
Aramco for instruction on how to properly complete its survey based on varying
fiscal year-ends.
Reported revenues and costs shall be consistent with the reported documents
following the International Financial Reporting Standards (IFRS) or Generally
Accepted Accounting Principles (GAAP) in Saudi Arabia. If the company does not
recognize an item as revenue or an expense in its income statement, then it should
not be claimed in the iktva report unless the cost incurred qualify for iktva as
illustrated in these guidelines.
The revenue and cost information provided in the iktva survey shall be on an accrual
basis.
The company will need to eliminate any intercompany transactions between related
entities that are included in the survey when completing a consolidated iktva survey.
Related entities that are outside the scope of the iktva survey are considered as
other companies.
5
Annual iktva Submission KPI Tracking:
Progression of the survey submission will be monitored as follows from the date of
issuance / release of guidelines from Aramco:
▪ Company: (30) days from the start of the survey (first time filer 45 days,
repeat filer 25 days)
▪ Auditor: (25) days from receiving the survey
Aramco may allow specific submission approvals solely on its own discretion based
on difficulties faced by the entities e.g. non-availability of latest audited financial
statements as statutory audit is in progress. Any exception needs to be approved by
Saudi Aramco at least 15 days before expiry of above-mentioned period.
iktva Submissions:
Submissions shall be inclusive of all IK & OOK operations that do business with Saudi
Aramco and KSA.
In most instances, companies are required to submit a consolidated iktva surveys

covering all related entities. However, in some cases, submitting multiple surveys
would be better to obtain a better picture of the iktva ratio for their various and
diverse operations.
Aramco joint ventures should file a standalone survey apart from other related
entities and should not be consolidated within any subsidiaries’ surveys.
Companies should contact Saudi Aramco at iktvasurveyinfo@aramco.com upon

changing the submission methodology from single to consolidated submission and
vice versa.
Companies with partially owned Joint Ventures (JVs), affiliates, or subsidiaries that
file a consolidated return will only recognize their ownership share of the related
companies’ iktva results. As an example, if the company owns 35% of a JV, then it
can incorporate only 35% of revenue, costs, and headcount. If the ownership is less
than 20%, then the related entity can be excluded at the company’s option.
Amounts reported in Sections 1 through 9 should not be double counted. For

example, if an In-Kingdom training service provider’s costs are shown in Section 3:
In-Kingdom Goods, Services, & Depreciation/Amortization, these costs cannot be
6
counted again in Section 7: Training & Development of Saudis. The company may
only assign costs to a single category.
The assumptions and calculation methodologies utilized in preparing the survey

should be consistent from year to year and within the guidelines provided by Saudi
Aramco or provided on www.iktva.sa.
All amounts reported in the iktva surveys need to be supported by appropriate and
auditable documentation which will undergo the same scrutiny as the amounts
presented in the company’s year-end audited financial statements.
Annual iktva survey must be audited through a third-party auditor. A list of trained
and approved auditors can be found at: www.iktva.sa
Self-certification: Companies with only Out-Of-Kingdom (OOK) operations, and/or

have minimal In-Kingdom (IK) content (less than 5%) should self-certify. For further
details on self-certification or other iktva related inquiries, please contact:
iktvasurveyinfo@aramco.com
Capturing Revenue in iktva

The purpose of capturing revenue is to recognize costs related to in-Kingdom (IK) and
Out-Of-Kingdom (OOK) revenues generated by Saudi Aramco. This allows Saudi Aramco
to identify the portion of its spend that contributes to the local economy.
Revenue is categorized into IK Revenue, OOK Revenue and Exports. This includes
revenue generated by goods and services provided to Saudi Aramco and other IK
customers, as well as exports made by IK operations.
IK Revenue
Part (1) Part (2) Part (3)

IK Operations OOK Operations Exports
7
Part (1): IK Revenue Derived from IK Operations
This category captures the revenue from IK-based customers, served by IK operations.
If the customer is Saudi Aramco (directly or indirectly*), then the revenue will be added
in both the Saudi Aramco’s section and Total KSA section. Revenue from other IK
customers shall only be added under the Total KSA section only.
Part (2): IK Revenue Derived from OOK Operations
This category captures the revenue from IK-based customers-, served by OOK
operations. This applies to OOK revenue generated from sales to Saudi Aramco or other
IK customers as well as local agents that resell the company’s imported finished
products. This type of revenue is not generally reported in audited financial statements
of the local entity, however, giving the fact that this revenue belongs to the OOK entity
and earned from IK customers, it needs to be added in the iktva Survey.
Part (3): Exports Revenue
This category captures exports defined as good and/or service produced from IK
operations and sold to OOK end users.
The economic activity of the transaction(s) should involve the transfer of goods or the
rendering of services to the OOK end users. Exported goods or services resold to KSA
based customers do not qualify as exports. End customer must be located OOK. Bill-to
address only does not imply that the transaction qualifies for export revenue in iktva.
In-case of services, the related technical team of the IK entity may provide services
within or outside Saudi Arabia for an OOK customer e.g. providing consultancy support
through remote basis or may physically work in the OOK customer’s location.
Eventually, the OOK customer pays the IK entity for such services.
Direct & Indirect Revenue to Saudi Aramco

Revenue figures from Saudi Aramco shall include revenue received directly and
indirectly from Saudi Aramco. If the ship-to address, unique product characteristics,
project location, or other facts and circumstances link the revenue to Saudi Aramco’s
IK operations, then the revenue should be included as part of the Saudi Aramco revenue
and the Total KSA revenue amounts.
Revenue derived from partially owned subsidiaries, affiliates and JVs (in Saudi Aramco’s
Annual Report) of Saudi Aramco should not be included in the Saudi Aramco revenue.
Information relating to Saudi Aramco’s subsidiaries can be found in latest audited
financial statements of Saudi Aramco.
8
Example:
If the company is working as a subcontractor on a Saudi Aramco project, it should
report revenue from this contract as Saudi Aramco revenue even though the
company may invoice and receive payment from the main contractor. The same
concept applies if the company sells goods and/or services through a broker or
an agent to Saudi Aramco (including Aramco Overseas Company and Aramco
Services Company).
If a company has direct Purchase Order with Saudi Aramco, it would qualify as
direct revenues with Saudi Aramco.
9
Recognizing Costs Related to Revenue from Saudi Aramco
There are two methods that can be used to recognize the costs associated with Saudi
Aramco Revenue:
Direct Costs: The company is able to link the costs directly with Saudi
Aramco business.
Revenue Ratio: Multiplying the Total KSA costs/headcounts with the
revenue ratio will allow companies to extract costs associated with Saudi
Aramco. The formula of revenue ratio is defined below.
𝑆𝑎𝑢𝑑𝑖 𝐴𝑟𝑎𝑚𝑐𝑜 𝐼𝐾 𝑅𝑒𝑣
𝑅𝑒𝑣𝑒𝑛𝑢𝑒 𝑅𝑎𝑡𝑖𝑜 =
𝐾𝑆𝐴 𝐼𝐾 𝑅𝑒𝑣 + 𝐸𝑥𝑝𝑜𝑟𝑡𝑠 𝑅𝑒𝑣
Estimation of Company Costs

As some iktva costs cannot be traced directly through companies’ financials, iktva
allows to use assumptions to calculate the costs for categories C, D, and R. Estimated
costs must be reasonable and provided to the iktva auditor for verification. If the cost
is based on assumptions, it will be capped at 1.5% of the Category E: Total Costs (IK
and OOK cost) for each category of training and development, supplier development,
and research and development. Supporting documentation must be provided to justify
and validate those assumptions. More information of the documents required for
assumptions can be found in the respective sections.
10
Component A
11
Component Captured in this Section
𝐸
Component A Depreciation of Invested CAPEX and and Right of Use assets, and Expat
Compensation
Component E Total Cost
Includes incentives: Exports, Environment Social Governance,

Component I
12
Goods and Services
Goods and Services (G&S) in iktva
Goods and Services are not meant to be limited to costs used to derive gross
margins. In addition to expenditures that would normally be included in cost of
goods sold, cost of sales, and cost of services, the Goods and Services category is
intended to capture purchases from all IK companies regardless of how they are
classified on a traditional income statement. As a result, general and administrative,
selling, marketing, and financing charges can be included in Goods and Services if
procured from a local supplier.
Process of Capturing IK G&S

Top 70% of IK G&S Purchased
Each supplier listed as part of the top 70% of IK G&S purchased may have an iktva ratio
equal to the highest of either: The Business Segment Estimate (BSE) or the IK supplier’s
actual iktva score. iktva participants are allowed to use the BSE if the IK supplier of the
G&S does not have an iktva score or the iktva score is lower than the BSE. If the supplier
is a trader and provides imported goods manufactured OOK, then the supplier will be
categorized as an importer and the BSE will be equal to 0%. However, if the supplier is
a trader of locally manufactured products, it will be assigned the BSE ratio of the
manufacturer minus 10%. Suppliers who import materials and apply some forms of IK
value adding activities such as assembly will obtain the BSE of the manufacture.
Example:
Assuming that the total value of IK G&S purchased is $1000, and one supplier
represents 70% of the total IK purchases ($700). If the supplier’s actual iktva score is
50% (for the appropriate year or the year before), and the BSE is 20%. In this case,
the actual iktva score will be considered as it is higher than the BSE ratio. The
recognized iktva cost will be then equal to 0.5 * $700 = $350.
If the supplier’s iktva score is 15%, or the supplier does not have an iktva score, and
the BSE = 20%, then the BSE will be considered. The recognized iktva cost will be
then equal to 0.2 * $700 = $140
If the supplier is a trader, the BSE = 0% and the recognized iktva cost will be $0. If the
supplier is a trader of local materials, and the BSE of the local manufacture for such
material = 20%, then the iktva ratio will be 20% - 10% = 10%. The recognized iktva cost
will be then equal to 0.1 * $700 = $70
13
Other 30% of IK Goods and Services Purchased
Upon listing 70% of the company’s IK purchases, the other 30% earn a 100% iktva
contribution. For example, if the total value of IK goods and services is $1000, the other
30% will hold a value of $300. The iktva contribution will thus be $300.
Company Iktva
Purchase of IK
Top 70%
Contribution =
Recognized IK iktva $350
Cost
Highest of…
G&S
Ex. $700 Ex. 50% * $700
Ex. $1,000
Other 30 %
Companies’
BSE OR
iktva Score
Ex. 20% Ex. 50%
iktva contribution =
100% If
Trader
Recognized IK iktva cost
Importer Local
OR materials
BSETrader = 0% BSETrader = BSE-10

BSE Manufacturer - 10
$300
Ex. 100% * $300
What is Excluded from Component (A- Goods and Services)?

Spend with OOK companies Non-cash transactions (e.g. provisions, FX
gains and losses)
Contract penalties
Saudi Aramco: Company General Use Dividend payments
Government penalties Refundable VAT
Intercompany costs if consolidated Capital expenditure
Costs reported in other sections
14
Significant Changes in Inventory and Accruals Under Component (A-
Goods and Services):
As stated previously, the iktva survey shall be prepared on accrual basis. Therefore,
consumption of goods shall be reported and not the purchase of goods. As some
companies may not be able to report goods from IK suppliers based on consumption
data, purchase data may be used. However, an adjustment must be made to convert
purchasing data to consumption data. Hence, the significant changes in inventory and
G&S related accruals line was added to accommodate for such cases. This is only
applicable if changes in inventory are significant and have a major impact on iktva
(defined by iktva authorized auditors).
Example:
Positive Adjustment (+USD 500K): Assuming an entity has purchased inventories
during the year 2020 amounting to USD 500K but they have reported in their audited
financial statements a cost of USD 1 million. This means that they have reported a total
consumption of USD 1 million which is calculated as (USD 500K consumed from opening
inventory purchased in prior years + USD 500K purchased and consumed during current
year).
Negative Adjustment (-USD 500K): Entity has purchased inventories during the year
2020 amounting to USD 1 million but they reported in their audited financial statements
a cost of USD 500K. This means that they have reported a total consumption of USD
500K (as actual amount of inventory consumed during the year) and remaining inventory
would be used in subsequent years and will be reported in their costs in subsequent
years.
Ideally those adjustments should be identified with a specific supplier. If the company
is unbale to associate those adjustments with specific suppliers, the adjusted amount
will be reported under significant changes in inventory line. Only change in inventory
related to IK purchases should be included. The iktva ratio used for the changes in
inventory is the weighted average iktva ratio of the top suppliers listed in the IK
suppliers table.
Saudi Government Payments

Those payments assigned an iktva ratio of 100%. They include nonrefundable
government payments including: taxes paid in Kingdom (by IK entities or OOK group
entities), zakat, withholding taxes, customs, duties, nonrefundable VAT, expat related
fees, etc.
Payroll related government payments (e.g. Employer portion of GOSI) should be
excluded and instead reported as part of compensation costs in in the Labor section.
15
Financing Costs
Those payments assigned an iktva ratio of 70%. They include any interest and finance
changes paid to local banks, lending institutions, lessors, etc. However, they do not
include principal payments made to these entities, as the principle payment will be
treated as an operating or capital expense for the company.
Petty Cash
Petty cash expenses, if represent 70% of local purchases, should be grouped in one line
and listed as part of the Top IK suppliers table. The iktva ratio assigned will be the
weighted average iktva score of the samples selected by the auditors.
Capital Expenditure
The iktva survey includes capital expenditures (Additions in Property, Plant and
Equipment (PPE), Intangibles, Right of Use (ROU) Assets, Transfers from Related Party
(Net Book Value (NBV)), and Transfers from Capital Work InProgress (CWIP)) the
company has made for its IK operations. Consistent with standard accounting practices,
major refurbishments and repairs, if capitalized for financial reporting purposes, should
also be included in Capital Expenditure Section. However, construction in progress or
assets that have not yet been placed in service should be excluded. In the annual iktva
survey, disposals (Disposals in PPE, Intangibles, ROU, Transfers to Related Party, and
Write-off of assets) should only be deducted if included in previous years’ iktva capital
expenditures.
The percentage of capex costs allowed for iktva is determined based on the source of
the asset. Any assets manufactured IK will receive a 100% allowance. Assets imported
or procured from OOK suppliers will be assigned 20%.
Estimated useful lives and depreciation methodology are calculated as follows: the
allowable costs of all assets acquired during a particular year (even including land which
normally is not depreciated) are depreciated or amortized on a straight-line basis over
a 10-year life regardless of their actual useful life. The depreciated amount is added in
Component (A).
Expat Compensation
iktva accounts for (37%) of the total allowed cost under expat compensation. GOSI
registered expat staff salaries should be claimed in labor section. If a company wants
to claim Non-GOSI registered staff salaries in labor section, they need to provide the
following documents to iktva auditor:
▪ Total of such salary’s expenses relating to Non-GOSI staff,
▪ If such staff are provided by Group Company,
▪ Nature of visa for such staff (e.g. business visit visa)
16
▪ Such staff working on-shore or off-shore.
▪ Any other information, which can be of material significance.
17
Component B
18
𝐸
Compensation

Component I
19
Saudi Compensation in iktva
Compensation costs in iktva captures all costs related to Saudi employees. The
amounts should come from the company’s payroll records and it should include:
salaries, wages, bonuses, commissions, overtime, and benefits.
(Benefits would include: car allowances, transportation, healthcare insurance, end of service
awards, and other compensation related perks provided to the company’s employees)
Owner/Management Remuneration and Board Fees

Dividends and large compensations to owners and managers are not treated as part of
Saudi Compensation if such amounts are directed only to the owners or other related
parties.
Board fees would be considered as a “Service” and included in Component (A) if paid
to Saudi individuals.
Saudi Expats
If the company employs Saudi Nationals OOK and are not reported in the company’s
payroll numbers or local financial records, the company can add these headcounts and
compensation amounts to Component B. In the annual iktva survey, these additional
costs can be added through the Cost Reconciliation Table.
Expats
As mentioned in component A, expats costs are recorded in iktva with 37% allowance.
If expats are on temporary visa and are living IK, then their compensation costs
qualify for iktva. However, expats are on temporary visa but not living IK (e.g. on an
offshore rig), then amounts are not allowed in iktva.
Government Reimbursement
If the company receives funding to help cover employee compensation and/or training
costs from the government through programs such as HRDF and Saned
(unemployment), then these reimbursements do not need to be netted with
compensation costs. Instead, they should be excluded from the iktva survey.
20
Component C
Component C
21
𝐸
Compensation

Component I
22
Training & Development in iktva
Training and development costs, IK or OOK, include a wide variety of activities that
are geared toward increasing the knowledge base and skillset of the Saudi
workforce. It can include all types of trainings: whether technical or non-technical
and performed in-house or externally.
What is Captured in Component C?

All types of trainings fall under component C such as: safety, leadership, soft skills, and
technical skills. In addition, sponsorships by various training and educational
institutions located IK may also be included in component C. On-the-job training (OTJ)
might qualify if properly documented and tied to Saudi employees that are new to their
positions. Any assumptions made in this category will be limited to 1.5% of Category E.
Costs incurred with OOK companies for Training & Development of Saudi nationals, may
be captured and reported in the company’s iktva survey.
Examples of T&D costs:
Travel and accommodation Outside training consultants
Training and development courses
Annual software license fees related to The portion of compensation for expats
training related to training Saudis
Technical training academies, internships, Donations and contributions to training
and co-op sponsorship costs. academies and institutes
Software Donations
Any donations of in-house created software will be limited to 1% of Component (E). The
entity should provide to its iktva auditors related documentation enabling them to
verify such as:
The software was created in house (through time-sheets, emails etc.) showing that entity
has actually incurred cost for its creation,
It was actually donated to the entities / universities (e.g. acknowledgment /
confirmation)
Method used to value the software e.g. market-based value estimates justified by strong
internal assumptions with proper documentary evidences. E.g. a research study conducted
by in-house relevant technical team on the useful life and its value etc.
23
On-the-Job Training (OJT):
For OJT, if an entity intends to claim certain Compensation & Benefit (C&B) of expat
staff, then, only senior level expat trainers’ C&B cost (full / partial) can be claimed
subject to properly documented time and supporting documents. Senior level expats
include staff which qualifies for categories of Manager, Professionals, Technicians and
associate professionals. For the rest of the categories, it is presumed that such expat
staff would not be adding much to the skill set of Saudis.
Further, only Saudi employees that are new to their positions would qualify as trained
head counts. It is presumed that a Saudi employee would be sufficiently trained if he
is holding the same position for more than 3 years.
Training Sessions
(for Saudis & Non-Saudis)
If a training session includes both Saudi and non-Saudi participants, then a proportional
share of the training costs should be allocated among the trainees based on head
counts.
Supporting Documentation
The company should have following documentation in order to claim training:
- A complete list of trained Saudis and expat trainers which contain the following
information:
o Full name, iqama / national IDs
o Registered on payroll as staff, intern, or trainer
o Staff designation
a) External trainings:
o Invoices from or payment support of the institute,
o Training completion certificates showing names of Saudi trained,
o If training certificates are not available, then any attendance log can be
used as alternative evidence.
b) Internal trainings (OTJ):

o Timesheets:
▪ Time sheets of Trained Saudi Staff showing training hours,
▪ Time sheets of in-house expat trainers showing training hours,
o Email communications providing solid evidence of OTJ.
If no time sheet or email communication evidence is provided then the
assumption will not be accepted.
24
o Approved job description by HR of mentioned expat trainers showing such
expats is responsible for Saudi trainings.
25
Component D
26
𝐸
Compensation

Component I
Component D
27
Supplier Development in iktva
Supplier Development is defined by the Chartered Institute of Procurement &
Supply (CIPS) as: “the process of working with certain suppliers on a one-to-one
basis to improve their performance for the benefit of the buying organization. It
is closely associated with supplier relationship management and partnering - two
separate subjects on which CIPS has similar documents.”
What is captured in component D?

Related
Capabilities Related Process Related Operating System Related
Areas
Design Process capability

Technical CAD/CAM
New product intro. Process design
CIM/FMS
Capability Feasibility testing Automation
JIT/MRP
Product improvement Reconfiguration
Quality assurance program

Quality Specification limits Process capability
Quality circles
Incoming materials Testing equipment
Capability S.P.C. program
control Workman-ship
Worker training
Delivery Capacity level Order entry system

Product mix
Process flexibility Scheduling flexibility
Capability Materials lead time
Set-up times Transportation/ inventory system
Value analysis Process efficiency
Cost R&D expenditure Capital investment Work productivity
Capability Cost reduction Rationalization of Indirect costs control
programs workplace
Activities that are contractually required, generate revenue, or costs that are charged
directly or indirectly to the supplier do not qualify.
Examples of supplier development cases:
Company A shares its designs and product specifications to Company B in order to increase
the technical capabilities of Company B which will support the overall quality of Company
A’s products
Company A performs safety and competency-based training programs to Company B
Company A performs a localization awareness/workshop program to its companies
Company A provides consultation to Company B to increase the company’s overall quality
Company A supports Company B in logistics and transportation
Company A donates equipment to Company B
Company A provides financial Aid (donations) to Company B to support a project or
development
Similar to Training & Development Section, the company may include costs incurred
from OOK companies or expat employees (subject to availability of proper audit
documentation including approved time sheets for time allocation from group HR, pay-
slips, email correspondences exchanged between IK, OOK and suppliers’ staff etc.).
28
However, if any costs have already been included in other sections of the survey, they
should be excluded from here. Any assumptions made in this category will be limited
to 1.5% of Category E.
Supporting Documentation:
The company should have following documentation in order to claim supplier
development cost and credit:
- Full list of staff with their name, fully dedicated / portion allocated (FTE counts),
nationalities, GOSI (Non-GOSI) status, IK / OOK status, designation and small
brief on his / her job description which the company wants to cover in supplier
development.
- Approved timesheets for relevant staff doing SD activities.
- If any OOK based staff cost is included in SD:
o The company should maintain all documents including pay slips, email
confirmations, and approved time sheets confirming that such OOK global
employee has worked for supplier development for KSA based suppliers.
- If no approved timesheets, pay slips, or email confirmation are available, then
the company cannot claim allocated C&B of related IK / OOK staff.
- Each employee should keep log of all email communications with the suppliers
(to be verified by iktva auditors on sample basis).
- Each concerned staff should fill a form which is a confirmation from the
respective employee acknowledging that he / she understands what is supplier
development and also acknowledges activities performed during the year.
- The company should maintain list of all suppliers developed. All such suppliers
should confirm on their letter head or email by their COO / CEO or any operations
senior level employee that the company has provided:
o Name of the staff of the company who were engaged in supplier
development
o Any benefits obtained through this supplier development activity
o No payment was charged by the company or any amount adjusted against
such voluntary training
o The supplier development activities were conducted at suppliers’
premises or within the company premises
- A supplier should not be trained for more than 3 years for same training course
e.g. it is expected that a supplier should be reasonably trained for VAT
compliances in three years.
29
Component R
30
𝐸
Component A Depreciation of Invested CAPEX and and Right of Use assets, and Expat
Compensation
Component D Supplier Development

Component I
31
Research & Development in iktva
Research & Development (R&D) costs include the total amount of annual operating
expenses related to (R&D) activities conducted IK. Corporate allocations from the
company’s R&D centers located outside the Kingdom do not qualify. R&D costs can
include expat compensation as well as IK and OOK goods and services.
Any capitalized costs on the books of the company (such as depreciation) can only be
included in R&D to the extent they are amortized. The types of costs that can be
classified as R&D should be consistent with guidance provided by International Financial
Reporting Standards (IFRS) or Saudi Arabian Generally Accepted Accounting Principles
(Saudi GAAP). International Accounting Standard 38 Intangible Assets offers the
following definitions:
Research is original and planned investigation undertaken with the prospect of
gaining new scientific or technical knowledge and understanding.
Development is the application of research findings or other knowledge to a plan
or design for the production of new or substantially improved materials, devices,
products, processes, systems or services before the start of commercial
production or use.
Examples of research & development:
Activities to obtain new knowledge on self-driving technology
Search activities for alternatives for replacing metal components used in a
company’s current manufacturing process
Search activities for a new operating system to be used in a smart phone to
replace an existing operating system
Design and construction activities related to the development of a
prototype
Design and construction of a new tool required for the manufacturing of a
new product
The entity should have sufficient and appropriate audit documentation including data
showing staff nationalities, staff designation, brief on how such staff contributes in
R&D, approved justification from HR for percentage time allocation with approved time
sheets, analysis showing R&D activities conducted during the year and its impact on
entity’s products / services / operations etc.
32
Supporting Documentation:
The company should have following documentation in order to claim R&D cost and
eligible for any related credit:
- Maintain a list of staff showing their name, fully dedicated / portion allocated
(FTE counts), nationalities, GOSI (Non-GOSI) status, designation and small brief
on his / her job description which the company wants to cover in R&D.
- Approved timesheets for relevant staff doing R&D activities.
- If any OOK staff cost is included in local R&D activities:
o The company should maintain all documents including pay slips, email
confirmations, approved time sheets by local company’s HR confirming
that such OOK global employee has worked for R&D.
o The staff should be physically present in Saudi Arabia.
- If no approved timesheets, pay slips, or email confirmations are available, then

the company cannot claim allocated C&B.
- Each concerned staff should fill a form which is a confirmation from the
respective employee acknowledging that he / she understands what is R&D and
also acknowledges activities performed during the year.
- If there is no disclosure in audited financial statements (FS) for R&D cost and the
company intends to claim R&D cost based on internal allocations from payroll /
goods and services, then, it should:
o Disclose the reason in AUP why its management has not disclosed R&D in
audited FS if it existed there
o Disclose in iktva Survey, list of major R&D activities performed e.g. any
patents obtained, heavy duty machinery purchased etc.
Bonus Factor on Components (D) & (R)

Components D & R are eligible for a bonus factor.
This bonus is calculated based on a multiplier factor (5X) which can be applied to the
company’s spend in these categories. The total bonus percentage allowed for each
Section is capped at 5% points. The final calculated bonus for each section will be added
to your company’s iktva score.
33
Component E
Component E
34
𝐸
Includes full details about local Goods & Services, Depreciation of

Component A
Invested CAPEX and Right of Use assets, and Expat Compensation

Component I
35
Total costs in iktva
Component E captures all costs the company has incurred during that year. Costs
from OOK operations done by affiliates are also included i.e. OOK revenue earned
through IK customers by group global operations.
Below is the general calculation used to capture component E:
𝑬 = 𝑪𝒐𝒔𝒕𝒔 𝑹𝒆𝒄𝒐𝒈𝒏𝒊𝒛𝒆𝒅 𝒊𝒏 𝒊𝒌𝒕𝒗𝒂 + 𝑪𝒐𝒔𝒕𝒔 𝑼𝒏𝒓𝒆𝒄𝒐𝒈𝒏𝒊𝒛𝒆𝒅 𝒊𝒏 𝒊𝒌𝒕𝒗𝒂 + 𝑶𝑶𝑲 𝑪𝒐𝒔𝒕𝒔
Deductions:
Deductions from the audited total costs may occur in the following scenarios:
If the company has OOK branches/operations that are included in the local
entities audited financial statements, unqualified costs for iktva associated
with those OOK operations, along with the OOK revenues generated from OOK
customers, should be excluded from the company’s iktva survey.
Accounting adjustments like provisions for doubtful debts, inventories, any
impairment allowances, if the impact on iktva is more than 2%, should be
excluded as these are IFRS based accounting entries and do not reflect any
economic value addition within the Kingdom.
For consolidated iktva surveys when using standalone audited financial
statements, transactions conducted by related parties in iktva consolidation
should also be removed as these reflect internal costs to each other and the
suppliers list should not also contain these entities as suppliers.
Share of loss from investment in associates/subsidiaries should be also
deducted from the audited cost.
Additions
Costs that are not incurred directly by the local company, however they contribute to
the local economy can be added to iktva.
Examples:
If the parent company or affiliates hire Saudis working in OOK operations and
their compensation costs are not captured in the local company’s audited
financial statements, their compensation costs and headcounts can be included
in the iktva survey. Since they qualify for iktva, these costs and headcounts
would be reported in Labor Section.
If the company has OOK related entities or affiliates that source local goods and
services to service OOK customers, these costs can also be added to the local
36
company’s costs and reported in IK suppliers Section. The entity should obtain a
written confirmation from such global OOK entities whose purchases from IK
suppliers represent more than 50% of total IK purchases. The confirmation should
contain name of IK suppliers for purchases, period of purchase, and amount in $.
These costs must undergo the same iktva audit scrutiny as the company’s own
costs. As a result, proper supporting documentation needs to be provided to the
auditors in order to be includable in your iktva survey.
37
Component I
38
𝐸
Compensation

Component I
39
Component I in iktva
Exports Incentive Factor (X)
Historically, the exports bonus was capped at 10%. Upon removing the cap last year,
companies will now be able to achieve an additional bonus beyond 10% for their
exporting activities. As a result, for every additional 5% (above the initial 10%),
companies will be awarded an extra 1% bonus on their iktva, representing a 5:1 ratio
of exports: bonus. This is defined in the formula below:
𝐸𝑥𝑝𝑜𝑟𝑡 % 𝑜𝑓 𝑇𝑜𝑡𝑎𝑙 𝑅𝑒𝑣𝑒𝑛𝑢𝑒 ≤ 10%, 𝑋 = 10

𝑖𝑓 { (𝐸𝑥𝑝𝑜𝑟𝑡% ∗ 100) − 10
𝐸𝑥𝑝𝑜𝑟𝑡 % 𝑜𝑓 𝑇𝑜𝑡𝑎𝑙 𝑅𝑒𝑣𝑒𝑛𝑢𝑒 > 10%, 𝑋 = [10 + ( )]
5
Example:
If Company A has exports=33% of its total revenue, then iktva bonus (Export
Revenue Factor (X)) would be 14.6% shown in the chart below
Exports vs Iktva Bonus

20%
Exports > 10%
18% bonus ratio is 5:1
(Export Revenue Factor (X)
16%
14%
iktva Bonus
12%
10%
8%
6%
4% Exports ≤ 10%
2% bonus ratio is 1:1
0%
0% 5% 10% 15% 20% 25% 30% 35%
Exports
40
Environment, Social & Governance (ESG)
ESG is captured in iktva upon submitting an ESG rating from an approved 3rd party ESG
evaluation company. In the annual iktva survey, companies must submit their ESG rating
along with the results of the ESG evaluation in the iktva portal to be qualified for the
1% incentive factor.
For information and guidance on the ESG evaluation process, please contact the 3 rd
party ESG evaluation companies directly through the contact information available on
their websites. The approved 3rd Party ESG evaluation companies can be found on the
iktva website:
https://www.iktva.sa
Cybersecurity (CS)
iktva rewards companies who meet the requirements of Saudi Aramco’s cybersecurity
standards. In order to be qualified for the cybersecurity incentive of 1%, companies
must obtain a CCC certificate.
More details available in the following link:
https://www.aramco.com/en/workingwithus/suppliers/resources/cybersecurity-
compliance-certificate-program
Regional Headquarters Program (RHQ)

In the annual iktva survey, multinational companies who acquire the RHQ license from
the Ministry of Investment obtain a 1% incentive factor. RHQ license can be acquired
through the following link:
https://www.investsaudi.sa/en/sectors-opportunities/regionalHQ
For more information regarding the RHQ license, contact MISA directly through the
contact information available on their website.
Local companies who originated in the Kingdom of Saudi Arabia will receive the 1%
bonus factor upon providing proof of documentation indicating HQ is in kingdom, such
as a commercial registration to iktva Auditors.
41

2022 Iktva Guideline - Final Version 7.30.23

Uploaded by

Copyright:

Available Formats

2022 Iktva Guideline - Final Version 7.30.23

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

2022 Iktva Guideline - Final Version 7.30.23

Uploaded by

Copyright:

Available Formats

Calculation Guide

In-Kingdom Total Value Add (iktva)

iktva Certification | 2023

Saudi Aramco: Company General Use

iktva, in addition to a breakdown of the details pertaining to each iktva

iktva Formula Overview 4

70% Increase Thousands

iktva Formula Overview

Component B Saudi Workforce Compensation

Component C Training & Development of Saudis

Component D Local Supplier Development

Component R Local Research & Development

Component E Total Costs

Component I Includes Incentives: Exports, Environment Social Governance,

All financial figures should be reported in United States Dollars (USD).

▪ Auditor: (25) days from receiving the survey

In most instances, companies are required to submit a consolidated iktva surveys

Companies should contact Saudi Aramco at iktvasurveyinfo@aramco.com upon

Amounts reported in Sections 1 through 9 should not be double counted. For

The assumptions and calculation methodologies utilized in preparing the survey

Self-certification: Companies with only Out-Of-Kingdom (OOK) operations, and/or

Capturing Revenue in iktva

Part (1) Part (2) Part (3)

Part (2): IK Revenue Derived from OOK Operations

Direct & Indirect Revenue to Saudi Aramco

Estimation of Company Costs

Component B Saudi Workforce Compensation

Component C Training & Development of Saudis

Component D Local Supplier Development

Component R Local Research & Development

Component E Total Cost

Includes incentives: Exports, Environment Social Governance,

Process of Capturing IK G&S

Ex. 20% Ex. 50%

BSETrader = 0% BSETrader = BSE-10

Ex. 100% * $300

What is Excluded from Component (A- Goods and Services)?

Saudi Government Payments

Component B Saudi Workforce Compensation

Component C Training & Development of Saudis

Component D Local Supplier Development

Component R Local Research & Development

Component E Total Cost

Includes incentives: Exports, Environment Social Governance,

Owner/Management Remuneration and Board Fees

Component B Saudi Workforce Compensation

Component C Training & Development of Saudis

Component D Local Supplier Development

Component R Local Research & Development

Component E Total Cost

Includes incentives: Exports, Environment Social Governance,

What is Captured in Component C?

b) Internal trainings (OTJ):

Component B Saudi Workforce Compensation

Component C Training & Development of Saudis

Component D Local Supplier Development

Component R Local Research & Development

Component E Total Cost

Includes incentives: Exports, Environment Social Governance,