What is the Real Estate Transaction Tax?

Real Estate Transaction Tax (RETA) is a tax at a rate of 5% imposed on the value of real estate transactions in the Kingdom of Saudi Arabia. It was implemented in October 2020 and is supervised by the Zakat, Tax and Customs Authority (ZATCA).

This tax aims to regulate the real estate market, reduce irrational speculation, and achieve a better balance between supply and demand in the real estate sector.

When is the Tax Paid?

The Real Estate Transaction Tax is due upon the completion of any real estate transaction, with prominent examples including:

  • Buying and Selling: When selling or purchasing a property (land, villa, apartment, building).
  • Transfer of Property: If a property purchase contract is transferred to another person.
  • Off-Plan Sales: Purchasing a property before its construction (under construction).
  • Property Donations: In some cases that do not include first-degree relatives.

Who is Exempt from the Tax?

There are important exemption cases you should be aware of:

  • First Home for Saudi Citizens: The first home you purchase for personal residence is exempt (up to a maximum exemption of 1 million riyals).
  • Donations Between Relatives: Gifts and bequests of properties between parents and children are exempt.
  • Inheritance: Transfer of property through inheritance is not subject to the tax.
  • Expropriation for Public Benefit: Properties expropriated by the state for public projects.

How is the Tax Calculated?

Tax = 5% × Property Value (agreed-upon sale price or market value, whichever is higher).

Example: If you purchased a villa for 2 million riyals, the tax = 2,000,000 × 5% = 100,000 riyals.

Note: If this is your first home worth 1.5 million riyals, the first 1 million is exempt, and you pay tax on 500,000 only = 25,000 riyals.

How is the Tax Paid?

The payment process is easy and done electronically via the ZATCA platform:

  1. Log in to the ZATCA e-portal or mobile app.
  2. Select the Real Estate Transaction Tax service.
  3. Enter property contract details (deed number, date, parties involved).
  4. The due amount is calculated automatically.
  5. Pay via credit card or bank transfer (SADAD).
  6. Receive an electronic payment certificate to complete the notarization process at the Notary Public.

Difference Between Transaction Tax and Registration Fees

Many people confuse the Real Estate Transaction Tax with property registration fees:

  • Transaction Tax: 5% of the property value (goes to the public treasury).
  • Registration Fees in the Property Register: Nominal fees not exceeding a few hundred riyals (goes to notarization and registration services).

Frequently Asked Questions

Q: Are agricultural lands subject to the Real Estate Transaction Tax?
Yes, agricultural lands sold as real estate investments are subject to the tax, but there are exceptions for lands actually used for agriculture.

Q: Can the Real Estate Transaction Tax be paid in installments?
No, the tax must be paid in one lump sum upon completing the real estate transaction. However, some banks offer financing that covers the tax amount within a real estate financing package.

Q: What if I don’t pay the tax?
The property contract cannot be notarized at the Notary Public or registered in the Property Register without proof of tax payment. Additionally, delays may subject you to financial penalties of up to 25% of the tax amount.

Q: Does the tax apply to rentals?
No, the Real Estate Transaction Tax is not imposed on rental contracts. Rentals are subject to Value Added Tax separately.

Q: Has the tax rate changed recently?

Is it still 5% as it was since the application in 2020? Any change in the percentage is made through cabinet decisions officially announced.