The Real Estate Transaction Tax (RETT) is a key fiscal measure in Saudi Arabia, applying a 5% tax rate on the value of real estate disposals. Understanding the scope, exemptions, and compliance requirements for RETT is crucial for corporate taxpayers involved in property transactions across the Kingdom.
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What is the Real Estate Transaction Tax (RETT)?
Introduced in October 2020, RETT is a tax levied on the disposal of real estate assets in Saudi Arabia. This includes sales, assignments, or transfers of ownership, whether conducted by individuals, companies, or other legal entities.
RETT is charged at a flat 5% rate on the total transaction value, regardless of whether the transfer results in a profit or loss for the seller.
Scope of RETT
The tax applies to most transactions involving:
- Residential and commercial property sales.
- Land disposals, including vacant plots.
- Transfers between related parties, except for exempted cases.
- Assignments of rights to acquire property.
RETT applies across the Kingdom, covering both urban and rural properties, and is payable by the seller unless otherwise agreed in the sale contract.
Exemptions from RETT
Some transactions are exempt from RETT, such as:
- Transfers between spouses or direct family members.
- Inheritance transfers to heirs.
- Government acquisitions for public benefit.
- First-time purchases of residential property up to SAR 1 million (for individuals, not corporates).
- Charitable entity property transactions.
For corporate taxpayers, exemptions typically require meeting strict documentary and procedural conditions under ZATCA guidelines.
How RETT is Calculated
The RETT amount is determined by multiplying the transaction value (agreed sale price or market value, whichever is higher) by the 5% rate.
RETT Filing and Payment
- Declaration: RETT transactions must be declared via ZATCA’s online platform.
- Payment Deadline: Tax must be paid before completing the property transfer in the Ministry of Justice’s system.
- Penalties: Late filing or payment can result in fines and delays in registering the new owner.
RETT and VAT – Key Difference
RETT is separate from VAT. In fact, RETT replaces VAT on real estate disposals in Saudi Arabia. However, VAT may still apply to real estate development or rental services.
Best Practices for Corporate Taxpayers
- Ensure accurate property valuations to avoid disputes with ZATCA.
- Incorporate RETT cost considerations into project budgets.
- Check for possible exemptions before structuring transactions.
- Maintain transaction records for audit readiness.
Conclusion
RETT is a straightforward yet significant cost consideration for corporate taxpayers in Saudi Arabia. Understanding its scope, exemptions, and compliance rules ensures smooth property transactions and helps avoid costly penalties.
