All About Real Estate Transaction Tax (RETT) in Saudi Arabia

Updated on: Jan 23rd, 2024


4 min read

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Real estate is one of the popular investments in Saudi Arabia, and understanding the taxes levied on it is crucial for taxpayers. The Real Estate Transaction Tax (RETT) is a levy imposed on the transfer of real estate ownership in the Kingdom of Saudi Arabia.

This article explains all about RETT, from why, what, and how to calculate it and its impact on real estate businesses.

Why did ZATCA introduce RETT?

Saudi Arabia's taxation regime underwent significant changes in 2014 when the government introduced the Value Added Tax (VAT). Further, in 2020, they introduced RETT under the diversification strategy to generate non-oil revenue. RETT explicitly targets the real estate sector, a key contributor to Saudi Arabia's economic growth.

What is RETT?

RETT is a tax applied whenever there is a transfer of real estate within Saudi Arabia. Transfer includes buying, selling, gifting, or inheriting properties. The current RETT rate is 5% and is calculated based on the property's sale value.

What are the exemptions from RETT?

RETT applies to almost all real estate transactions except for the following:

  • Inheritance between close relatives: Spouses, parents, children, and siblings are exempt from RETT when inheriting property.
  • Government transfers: Properties transferred to or from the Saudi government are exempt.
  • Public interest projects: Transfers for public good initiatives, such as mosques or public utilities, are exempt.
  • Specific property types: Land allocated for agricultural purposes and undeveloped plots are currently exempt.

How to calculate RETT?

Buyers and sellers of real estate must understand how they should calculate RETT.

Let's assume the sale price of a property is SAR 1,000,000. Applying 5% RETT on this, the RETT payable would be SAR 50,000

Impact of RETT on businesses

The implementation of RETT has a clear impact on the real estate landscape in Saudi Arabia. Here's a glimpse of its effects:

  • Enhanced transparency: RETT encourages formalizing property transactions, promoting a more transparent market.
  • Price sensitivity: Businesses consider RETT while deciding on the sale prices that potentially affect the property value.
  • Investment shift: The tax might nudge investors towards specific property types due to exemptions or market trends.

Frequently Asked Questions

What is RETT?

The government levies Real Estate Transaction Tax (RETT) on property ownership transfers in Saudi Arabia.

Who should pay RETT?

Buyers and sellers can share the responsibility, though agreements can specify otherwise.

What is considered real estate for RETT purposes?

Land, buildings, and any permanent structures attached to the land.

What is the rate of RETT?

The current RETT rate is 5%.

When is RETT due?

You must pay Real Estate Transaction Tax (RETT) within 30 days of completing the transaction.

Are there any exemptions from RETT?

Yes, including inheritance between close relatives and specific property types.

What are the penalties for non-compliance with RETT?

You will end up paying fines and facing potential legal action.

Can I deduct RETT from my income tax return?

No, RETT is a separate tax and can not be deductible for income tax purposes.