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Saudi Arabia has officially implemented a 5% Real Estate Transaction Tax (RETT) across all types of property dealings, marking a significant policy shift aimed at bolstering non-oil revenue and increasing market transparency.
The new tax, which took effect on April 10, 2025, was announced by the Zakat, Tax, and Customs Authority (ZATCA) and applies universally—regardless of whether the property is residential, commercial, or industrial, and irrespective of its development status or ownership structure.
What’s Covered Under the RETT?
The 5% RETT will be levied on:
- All types of properties – including developed, undeveloped, and mixed-use
- Full and partial ownership transfers
- Undocumented property transactions
To comply, all real estate transactions must be processed through the RETT platform available on ZATCA’s official website. Parties involved are required to declare property details and any eligible exemptions before the transfer is finalized through a legal notary or competent authority.
Key Exemptions to the 5% RETT
Certain transactions will be exempt from the tax, including:
- Inheritance-related property transfers
- Gifts or transfers between spouses and relatives up to the third degree
- Transfers to registered public or private endowments
While the RETT is designed to apply broadly, ZATCA emphasizes that these specific exemptions are intended to prevent undue financial burden on family and philanthropic asset transfers.
Penalty Reductions for Late Payments
In an investor-friendly move, the penalty for late payment of the RETT has been reduced from 5% to 2%. This aims to encourage compliance while softening the impact on individual taxpayers and businesses adjusting to the new system.
Economic Context and Real Estate Outlook
This new tax aligns with Saudi Arabia’s broader Vision 2030 initiative to diversify its economy beyond oil. According to a recent JLL report, the Kingdom’s non-oil sector is forecast to grow by 5.8% in 2025, a notable increase from 4.5% in 2024.
The real estate market is a key part of that strategy:
- $29.5 billion in construction project awards were made in 2024 alone
- The market is projected to reach $101.6 billion by 2029, growing at 8% annually
Government officials say the RETT will not only generate revenue but also support a more transparent and modern real estate ecosystem.
What This Means for Investors and Property Owners
Foreign and domestic investors, real estate developers, and legal professionals involved in property transactions should immediately adapt their compliance processes to the new RETT rules. Ensuring accurate registration, declaration of exemptions, and timely payment will be crucial to avoid fines or legal complications.
A Milestone Move for Saudi Real Estate
The introduction of a universal 5% RETT signals a maturing of Saudi Arabia’s real estate and tax infrastructure. As the Kingdom continues to open its economy and attract foreign investment, transparent regulatory measures like this are expected to bring long-term stability and investor confidence to the real estate sector.
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