First: What is the Real Estate Transaction Tax (RETT)?

It is a tax imposed on any legal transaction that transfers ownership of real estate or its possession for the purpose of ownership or acquiring its benefit.

Source:

Implementing Regulation of the Real Estate Transaction Tax – Zakat, Tax and Customs Authority (ZATCA)
https://zatca.gov.sa/ar/RulesRegulations/Taxes/Documents/RETT%20Implementing%20Regulation.pdf

This includes – without limitation –:

• Sale
• Gift
• Exchange (consideration-based swap)
• Barter
• Will
• Long-term lease
• Finance lease
• Transfer of shares in real estate companies
• Granting a usufruct right for more than 50 years

The tax applies whether the transaction is:

• Formally notarized
• Or documented through non-official instruments

Tax Rate

The tax is imposed at a rate of 5% of the total transaction value.

It applies to:

• The entire property or part of it
• The land and any structures built on it
• Completed properties, under-construction properties, or off-plan properties

The declared value must not be less than the fair market value at the date of the transaction.

When is the tax due?

The tax becomes due on the date of the transaction.

Payment must be made:

• On or before the date of notarization before the Notary Public or licensed notary.
• For non-notarized transactions: within 30 calendar days from the date of the final contract or agreement.

In case of delay:

• A penalty of 5% of the unpaid tax for each month or part thereof.

Who is responsible for paying the tax?

• As a general rule, the transferor (seller) is responsible for payment.
• The parties may agree otherwise.
• However, before the Authority, the transferor remains legally liable.
• Both parties are jointly liable for any tax obligations.

Exempt Transactions

Key exemptions include:

• Division or distribution of inheritance.
• Transfer without consideration to a family or charitable endowment, or a licensed charity.
• Transfer to a government entity or public benefit entity.
• Expropriation for public interest.
• Notarized gift to a spouse or relatives up to the third degree, provided the property is not re-transferred within 3 years.
• Notarized Sharia-compliant will.
• Contribution of real estate as an in-kind share in a company (subject to 5-year holding conditions).
• In-kind contribution to a real estate investment fund (subject to specific conditions).
• Transfer between companies fully owned by the same persons (subject to a 5-year condition).
• Return of property to the previous owner within 90 days of notarization upon cancellation of the transaction.

A transaction is subject to tax only once if the parties, property, and value are identical.

What if tax was paid in error?

The tax may be refunded in the following cases:

• Overpayment.
• Payment made by mistake.
• Transaction not completed.
• Transaction canceled within the legally specified period and subject to regulatory conditions.

Penalties

The following are considered tax evasion:

• Providing incorrect information about the transaction value.
• Any arrangement or scheme leading to non-payment.
• Any act resulting in full or partial non-payment of tax.

Penalties may include:

• A fine not less than the amount of tax due.
• Up to three times the tax amount.
• Additional late payment penalties.

Collection and Legal Procedures

If payment is not made:

• A payment notice within 30 working days.
• A final notice within 15 working days.
• Attachment of assets through the competent authorities.

All deadlines are calculated according to the Gregorian calendar.

Appeal

Any person subject to a decision issued by the Authority has the right to:

• File an objection in accordance with the rules governing tax dispute resolution committees.

Important Notice for Almanazl Users

Any of the following transactions:

• Sale
• Transfer of ownership
• Non-exempt gift
• Off-plan sale
• Transfer of long-term usufruct rights

May be subject to 5% tax.
Ensure payment is completed before notarization to avoid penalties.