SA RETT

Section 1 — Quick reference

| Field | Value | |---|---| | Country | Kingdom of Saudi Arabia (KSA) | | Tax | Real Estate Transaction Tax (RETT) | | Arabic name | ضريبة التصرفات العقارية (Ḍarībat al-Taṣarrufāt al-ʿAqāriyyah) | | Currency | SAR (Saudi Riyal, ر.س) | | Tax basis | Per-transaction (no annual return — declared and paid at the point of each disposal) | | Primary legal authority | **Royal Decree No. (A/84) dated 14/2/1442H (1 October 2020)** establishing RETT and exempting real-estate disposals from VAT | | Implementing rules | **Real Estate Transaction Tax Bylaws** issued by ZATCA (originally published October 2020; amended subsequently) | | Headline rate | **5%** of the agreed transaction value, or fair market value if higher | | Tax authority | **Zakat, Tax and Customs Authority (ZATCA)** — هيئة الزكاة والضريبة والجمارك | | Declaration channel | ZATCA online portal — declared BEFORE notarisation of the title transfer | | Payment | At declaration; notary / Ministry of Justice will not register the transfer without a ZATCA RETT clearance reference | | Legal liability | The **seller (transferor)** is the legal taxpayer; commercial practice often shifts the economic burden to the buyer | | Replaces | The pre-1 October 2020 regime where real-estate disposals were subject to 15% VAT | | Validated by | Pending — requires sign-off by a Saudi-licensed tax practitioner or ZATCA-registered consultant | | Skill version | 1.0 |

Rate and exemption at a glance

| Transaction | Treatment | |---|---| | Sale of any real estate (land, residential, commercial, industrial) | 5% RETT on transaction value or FMV (greater of) | | Exchange (barter) of real estate | 5% RETT on each leg, based on FMV of each property | | Long-term lease ≥ 50 years | 5% RETT on aggregate lease consideration (treated as a disposal) | | Gift to a non-first-degree relative or unrelated party | 5% RETT on FMV | | Gift to first-degree relative (parent, child, spouse) | Exempt (with documentary proof) | | Inheritance transfer | Exempt | | Contribution of real estate to corporate capital (share-for-property) | 5% RETT on FMV unless qualifying restructuring relief applies | | Saudi-national first-home buyer, up to SAR 1,000,000 of value | Exempt (verify current cap with ZATCA) | | Waqf (endowment) transfers | Exempt | | Sale and leaseback (genuine financing) | May be exempt — case-by-case ZATCA ruling required | | Sukuk-structured real-estate financing | May be exempt — case-by-case ZATCA ruling required |

Refusal catalogue

| Trigger | Reason | |---|---| | Transaction value materially below comparable market evidence and no formal valuation has been obtained | ZATCA will substitute FMV — must obtain valuation first | | Property situated outside the Kingdom of Saudi Arabia | RETT applies only to KSA-situs real estate; out of scope | | Disposal pre-dates 1 October 2020 | Pre-RETT regime (15% VAT or earlier treatment) — out of scope of this skill | | Sukuk or sale-leaseback financing arrangement | Requires case-by-case ZATCA private ruling — out of scope of automated computation | | Real estate held by a corporate group undergoing restructuring (merger, demerger, share-for-share) | Possible restructuring relief under ZATCA rules — requires specialist review | | Mixed-use property where exempt-portion (e.g., partial first home) calculation is unclear | Obtain ZATCA pre-clearance or specialist sign-off | | First-home exemption claimed but taxpayer's prior ownership history is unknown | Cannot confirm "first home" status; STOP until property registry checked | | Long-term lease structure with optional extension clauses bringing aggregate term ≥ 50 years | Lease-classification analysis required; out of scope of automated computation | | Non-Saudi-national party where foreign-ownership restrictions or GCC reciprocity rules may apply | Foreign-ownership overlay required; out of scope | | Disposal in a Special Economic Zone (SEZ) or freezone with separate tax rules | SEZ-specific regime; out of scope |

Taxable persons

RETT is imposed on the transferor (seller / disposer) of Saudi real estate. The transferor may be: a Saudi-national individual; a resident expatriate (Iqama holder); a non-resident individual disposing of KSA-situs real estate; a Saudi-registered company or establishment; a non-resident company disposing of KSA-situs real estate; a government entity (generally exempt — see §3.4) or public-benefit body (case-by-case). Although the seller is the legal taxpayer, the buyer is typically the commercial bearer of the cost in Saudi market practice. The ZATCA RETT declaration is filed in the seller's name, but joint declarations and buyer-paid scenarios are common.

Taxable transactions

RETT is charged on any disposal of real estate, including: Sale — outright transfer of ownership for consideration. Exchange (barter) — each leg is a separate taxable disposal valued at FMV. Gift — taxable unless to a first-degree relative or otherwise exempt. Long-term lease ≥ 50 years — treated as a disposal under the Bylaws. Contribution of real estate to corporate capital in exchange for shares — taxable on FMV unless qualifying restructuring relief is granted. Transfer arising from a court order or judicial sale — taxable. Transfer of beneficial ownership via shell entity — anti-avoidance: ZATCA may look through to substance. The following are NOT taxable disposals: Inheritance transfers (intestate or by will). Gifts between first-degree relatives (parent, child, spouse). Waqf (Islamic endowment) dedications. Transfers between government entities. Corrections of title deeds with no change of beneficial ownership.

Taxable value determination

The taxable value is the higher of: 1. The agreed transaction value (consideration stated in the sale-purchase agreement, inclusive of all monetary and non-monetary consideration), or 2. The fair market value (FMV) of the property at the date of the disposal. Where ZATCA disputes the declared transaction value as being below market, it may require an independent valuation and assess RETT on the FMV. For exchanges, each side of the exchange is valued at the FMV of the property given up, and each transferor declares RETT on its own leg. For long-term leases ≥ 50 years, the taxable value is the aggregate of all consideration payable over the lease term (rent, premium, fees), discounted as required by ZATCA guidance.

3.4 Standard exemptions

| Exemption | Conditions | |---|---| | Inheritance transfer | Court-issued inheritance certificate (صك حصر الورثة) required | | Gift between first-degree relatives | Parent, child, spouse — documentary proof of relationship required | | Waqf (endowment) | Properly registered with the General Authority for Awqaf | | Transfer between government entities | Subject to administrative confirmation | | Diplomatic missions | On reciprocal basis under Vienna Convention principles | | Court-ordered partition among co-owners with no change in net ownership shares | Limited — requires documentary evidence | | Forced expropriation by government for public benefit | Compensation transfer is exempt to the original owner | | Transfers under a qualifying corporate restructuring | Mergers, demergers, group reorganisations — subject to ZATCA approval and clawback if conditions are breached within a holding period |

RETT rate

5%

First-home exemption cap

SAR 1,000,000

First-home exemption conditions

Buyer must be a Saudi national (Saudi national ID required). The property must be the buyer's first owned residential property — verified against the General Real Estate Authority (GREA) and Ministry of Justice registries. The property must be a residential dwelling (not raw land, not commercial). The exemption applies only to the buyer's RETT economic share — the seller's legal liability is reduced to the extent of the cap (i.e., the first SAR 1,000,000 of consideration is exempt, the excess is taxable at 5%). The exemption is claimed via the ZATCA portal at the time of the RETT declaration, with the supporting documents uploaded.

Inheritance transfer treatment

Transfer of real estate from a deceased estate to the heirs is exempt from RETT. The exemption applies whether the transfer is pursuant to a court-issued inheritance certificate (صك حصر الورثة) under Sharia inheritance rules, or pursuant to a registered will (وصية) within the limits permitted under Saudi law. The heirs' subsequent disposal of the inherited property to a third party is a fully taxable disposal at 5% RETT on the disposal value (no step-up reset of base — RETT is a transaction tax, not a gain tax).

First-degree relative gift treatment

A gift of real estate between first-degree relatives is exempt. First-degree relatives are: Parent to child (and reciprocally). Spouse to spouse. Gifts to siblings, grandparents, grandchildren, uncles, aunts, cousins, in-laws are NOT first-degree and are taxable at 5% on FMV (with anti-avoidance look-through if the gift is part of a connected arrangement). The exemption requires the gift to be: Properly executed in a notarised gift deed (هبة). Supported by civil-status documents proving the relationship. Declared on the ZATCA portal with the exemption code, even though no RETT is payable.

Sale-and-leaseback treatment

A sale-and-leaseback transaction — where the owner sells the property to a financier and immediately leases it back — has dual character. The sale leg is prima facie a taxable disposal at 5%. However, where the structure is a genuine financing arrangement (e.g., the seller retains substantial use of the property, the leaseback term and pricing reflect financing economics, and the title is expected to revert), ZATCA may grant case-by-case exemption under the Bylaws on the basis that there is no real economic transfer. Conservative default: assume RETT applies on the sale leg unless a written ZATCA ruling confirms otherwise.

Sukuk arrangements treatment

Real estate transferred to a sukuk-issuer vehicle (typically an SPV) as part of a Sharia-compliant financing structure — common in KSA Islamic finance — may be exempt where: The transfer is to an SPV solely for sukuk issuance purposes. Beneficial ownership economically remains with the originator. The Bylaws or a specific ZATCA ruling confirm exemption for the structure. Conservative default: assume RETT applies unless ZATCA pre-clearance has been obtained. The structure must be documented before the transfer to qualify.

Corporate restructuring relief

Transfers of real estate between members of a wholly-owned group in a qualifying restructuring (merger, demerger, share-for-property contribution where common control is maintained) may be exempt or deferred, subject to: ZATCA approval. A two-year holding period (or such other period as stipulated) post-restructuring — disposal outside the group within the holding period triggers clawback of the original RETT plus penalties. Documentation of the restructuring purpose and continuity-of-ownership analysis.

Example A calculation

| Line item | Amount (SAR) | |---|---| | Agreed transaction value | 45,000,000 | | FMV (per valuation) | 45,000,000 | | Taxable value (higher of the two) | 45,000,000 | | RETT at 5% | **2,250,000** |

Example B calculation

| Line item | Amount (SAR) | |---|---| | Agreed transaction value | 3,200,000 | | FMV (no independent valuation obtained — value within market range) | 3,200,000 (assumed) | | Taxable value | 3,200,000 | | RETT at 5% | **160,000** |

Example C steps

| Step | Treatment | |---|---| | Step 1 — Inheritance transfer (Jan 2024) | **Exempt** from RETT (inheritance) — declared on ZATCA portal with inheritance certificate, no RETT payable | | Step 2 — Onward sale (Sep 2025) | **Fully taxable** at 5%. Taxable value = SAR 800,000. RETT = **SAR 40,000** |

Declaration requirements

Every taxable real-estate transaction must be declared on the ZATCA online portal (Real Estate Transaction Tax module). The declaration is per-transaction; there is no periodic return for RETT (unlike VAT, which is filed monthly or quarterly). The declaration requires: Seller (transferor) details — ID, TIN/ZATCA account. Buyer (transferee) details — ID. Title deed number (صك) and property description. Transaction value and any supporting valuation. Any exemption claimed, with documentary upload.

Timing sequence before notarisation

The RETT declaration and payment must be completed before the notarisation of the title transfer. The Ministry of Justice / notary office will not register the title transfer without a valid ZATCA RETT clearance reference number. In practice: 1. Seller logs in to ZATCA portal and creates a RETT declaration. 2. Seller pays the computed RETT via SADAD (the national bill-payment system) or bank transfer. 3. ZATCA issues a clearance reference (electronic). 4. Seller / buyer present the clearance reference at the notary office. 5. Notary completes the title transfer in the Ministry of Justice e-system.

Legal liability for RETT

The seller (transferor) is the legal taxpayer under the Bylaws. Although market practice frequently shifts the economic burden to the buyer (and many sale-purchase agreements explicitly so provide), ZATCA's recourse for non-payment is against the legal seller — and against the buyer secondarily where the buyer paid the seller without verifying RETT clearance.

Records retention requirements

Both parties should retain: The signed sale-purchase agreement. The ZATCA RETT declaration confirmation and clearance reference. The SADAD payment receipt. The notarised title deed. Any valuation report supporting the declared value. Any exemption documentation (inheritance certificate, relationship documents, first-home declaration, restructuring approval). Retention period: 6 years from the date of the transaction (general ZATCA records-retention requirement; longer if litigation is pending).

6.5 Penalties

| Breach | Penalty | |---|---| | Late payment of RETT | **5% of the unpaid RETT per month** (or part-month) of delay | | Failure to declare a taxable transaction | Failure-to-file fine plus 5%/month interest; risk of nullification of the title transfer | | Under-declaration of taxable value | Assessment of the shortfall plus 5%/month interest, plus a tax-evasion penalty where ZATCA finds wilful conduct | | Wrongful claim of exemption (e.g., false first-home declaration) | Recovery of the RETT plus 5%/month interest plus a wrongful-exemption penalty; potential criminal referral |

Section 7 — Conservative defaults

| Ambiguity | Default | |---|---| | Transaction value vs FMV uncertain — no independent valuation | Obtain valuation; if not obtained, ZATCA may impose FMV — STOP until valuation in hand | | First-home exemption claimed but no Ministry of Justice prior-ownership check | Treat as NOT first home; pay full RETT pending verification (then file refund claim if confirmed) | | First-home cap uncertain (rates have changed since 2020) | Apply the most recently confirmed cap of SAR 1,000,000 and explicitly flag the cap for reviewer verification with current ZATCA guidance | | First-degree relationship documentation incomplete | Treat as non-first-degree; full 5% RETT applies pending civil-status proof | | Inheritance certificate not yet issued | STOP — wait for Sharia court certificate before declaring exemption | | Sale-leaseback, sukuk, or restructuring arrangement | Default to taxable at 5% pending written ZATCA private ruling | | Long-term lease close to but not exceeding 50 years (e.g., 49-year lease with option to extend) | Apply 50-year-or-greater treatment defensively — RETT applies on aggregate consideration | | Property of mixed residential / commercial character with first-home claim | Treat as not eligible for first-home exemption; full 5% RETT | | Non-resident transferor with possible withholding issue | Buyer should withhold RETT and remit to ZATCA pending clarification | | Disposal of beneficial interest via SPV shares (rather than direct title transfer) | Anti-avoidance — declare and pay 5% RETT on FMV; flag for specialist review | | Transaction value materially below market | Treat as FMV at greater of agreed value and arm's-length comparable | | Notary appointment within 48 hours and ZATCA portal unavailable | STOP and postpone the notary appointment — the title cannot lawfully transfer without RETT clearance |