In a landmark move to accelerate its economic transformation, Saudi Arabia has unveiled a 5% Real Estate Transaction Tax (RETT), set to take effect on April 10. The tax, announced by the Zakat, Tax, and Customs Authority (ZATCA), marks a significant step in the Kingdom’s Vision 2030 agenda to diversify its economy and stimulate growth in the real estate sector.

What Does the New Tax Entail?

The RETT will apply broadly to all property transactions—residential, commercial, and industrial—regardless of a property’s development stage, usage, or ownership structure. This includes partial transfers of ownership and even undocumented transactions, ensuring a comprehensive approach to regulating the market.

To streamline compliance, ZATCA has mandated that all property transfers be registered through its dedicated RETT platform. Parties involved in transactions must declare property details and verify eligibility for exemptions before finalizing transfers at authorized notary offices or legal entities.

Key Exemptions and Incentives

While the tax casts a wide net, several exemptions aim to protect social and familial interests:

• Transfers resulting from inheritance divisions.

• Registered public or private endowments (waqf).

• Transfers between spouses or relatives up to the third degree (e.g., parents, siblings, grandparents).

These exemptions align with Saudi Arabia’s cultural values and efforts to balance fiscal policy with social welfare.

Driving Growth in Real Estate and Beyond

The introduction of RETT is not just a fiscal measure but a strategic play to attract investment and modernize the Kingdom’s property market. According to a JLL report, Saudi Arabia’s real estate sector is poised for robust expansion, with projections estimating an 8% annual growth rate through 2029, pushing the market value to over $101 billion.

The non-oil economy is also gaining momentum, expected to grow by 5.8% in 2025—a notable jump from 4.5% in 2024. The construction sector alone saw $29.5 billion in project awards in 2024, underscoring the Kingdom’s infrastructure ambitions.

Simplified Compliance and Fair Valuation

ZATCA has emphasized transparency and ease of compliance under the new framework. Key features include:

• Clear guidelines for taxable transactions.

• Mechanisms for calculating taxes based on fair market value.

• A reduced late payment penalty, lowered from 5% to 2% to ease compliance burdens.

These measures aim to minimize disputes, curb speculative practices, and create a level playing field for investors.

A Vision for the Future

By introducing RETT, Saudi Arabia is reinforcing its commitment to building a dynamic, regulated real estate ecosystem. The tax framework not only addresses industry-specific challenges but also supports broader economic goals, such as reducing reliance on oil revenues and fostering sustainable growth.

For investors and homeowners alike, the reforms signal a maturing market with enhanced legal safeguards—a critical factor as the Kingdom positions itself as a global investment hub. As Vision 2030 gains momentum, Saudi Arabia’s real estate sector is set to play a pivotal role in shaping the nation’s economic future.

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