Saudi Arabia: Real estate Tax in Saudi Arabia and the act of evasion or avoidance.

The Real Estate Transaction Tax (RETT) was introduced in the Kingdom of Saudi Arabia with effect from 4 October 2020. Real Estate Transaction Tax (RETT) is a 5% tax imposed on the sale or transfer of real estate in Saudi Arabia. To register a real estate transaction, you must submit an application to the ZATCA (Saudi Arabian General Tax Authority). The application must include the following information: the names and addresses of the buyer and seller, the property address, the purchase price, and the date of the transaction.

All real estate, regardless of its status, nature, or usage at the time of disposal, is subject to the Real Estate Transaction Tax. Lands and what is being created, constructed, or built thereon, whether developed or not, are all considered real estate, whether this disposal contains all or part of a subdivided, common, residential unit, or other sort of real estate.

The transfer of shares or the stocks in a real estate company, which are companies that have real estate as more than 50% of their assets or capital, is subject to RETT and is considered an indirect transfer of the real estate company’s ownership unless there was a direct connection among the shares, stocks and company’s assets ownerships. The transfer of ownership of shares related to real estate funds traded on the financial market is not regarded as a form of transfer of share subject to the RETT.

Penalties

1- For every month or part of a month that the tax is unpaid, the late payment penalty is calculated as 5% of the unpaid tax.  

2- If one violates any of the provisions regarding the real estate transaction tax or the necessThere are some exemptions to the RETT. These include: the sale or transfer of real estate between family members, the sale or transfer of real estate that is used for religious or charitable purposes, and the sale or transfer of real estate that is located in a free zone.  

Some may try to evade the tax by providing incorrect information about the value of the real estate transaction, such as submitting incorrect documents proving the payment of the tax or manipulating the land areas during division. In general, carrying out an act that causes non-payment of the tax, in whole or in part, that has been proven by the Authority, is an exploitation of the situations stipulated in the system. ary executive and administrative decisions, including by being late, failing to disclose at the appropriate time, failing to disclose accurately, or giving an inaccurate value for the contract, or any other violations listed in the tax regulations pertaining to real estate transactions, the fine will neither be less than 10,000 riyals nor more than the amount of tax that is due.  

3- The penalty for tax evasion will be equal to the amount of the overdue tax, but not more than three times that amount.

Sellers are liable for violations and must pay the tax to the Authority and thus all forms of illegal evasions must be avoided.

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