Authored by the expert who managed and guided the team behind the Saudi Arabia Property Pack
Everything you need to know before buying real estate is included in our Saudi Arabia Property Pack
The Real Estate Transaction Tax (RETT) represents a crucial component of Saudi Arabia's property market regulations.
As we reach mid-2025, understanding this tax is essential for anyone considering property investment or relocation to the Kingdom. This guide provides clear, specific answers to the most important questions about RETT and its impact on the Saudi residential and commercial property markets.
If you want to go deeper, you can check our pack of documents related to the real estate market in Saudi Arabia, based on reliable facts and data, not opinions or rumors.
The Real Estate Transaction Tax (RETT) is a 5% tax on property transfers in Saudi Arabia, effective since 2020 with updated regulations in 2025.
The tax applies to all property ownership transfers but includes important exemptions for first-time Saudi buyers and family transfers.
| Feature | Details |
|---|---|
| Tax Rate | 5% of transaction value (based on fair market value) |
| Effective Date | April 9-10, 2025 (new regulations) |
| Who Pays | Seller primarily responsible; buyer can be jointly liable |
| Payment Deadline | Within 30 days of transaction |
| Applies To | All property transfers (sales, gifts, inheritance, shares) |
| Main Exemptions | First-time Saudi buyers (first SAR 1 million), family transfers, charitable transfers |
| Registration | Mandatory via ZATCA digital platform |
| Late Penalties | 2% per month, capped at 50% of tax due |
| Foreign Buyers | Same 5% rate applies, no special treatment |
What exactly is the Real Estate Transaction Tax (RETT) law in Saudi Arabia and how does it work?
The Real Estate Transaction Tax (RETT) is a straightforward 5% tax that you pay when transferring property ownership in Saudi Arabia.
The tax applies to the total transaction value, which must reflect the property's fair market value. ZATCA (Zakat, Tax and Customs Authority) collects this tax through their digital platform, and you must register every property transaction before it can be legally finalized at the notary.
The process works like this: when you sell or transfer property, you access ZATCA's online portal, declare the transaction details, pay the 5% tax, and then proceed to the notary for official documentation. Without proof of RETT payment or exemption, the notary will not process your transaction.
This streamlined digital process ensures transparency and compliance across all property transactions in the Kingdom.
When was the RETT law introduced and when did it officially come into effect?
RETT has evolved through two major phases in Saudi Arabia's property tax landscape.
Phase 1 began when the original RETT was introduced on October 1, 2020, and became effective on October 4, 2020. This replaced the previous 15% VAT on property transfers with a much lower 5% RETT.
Phase 2 brought significant updates when the new RETT law was published on October 11, 2024 (Royal Decree No. M/84), with implementing regulations becoming effective on April 9-10, 2025. These new regulations provide clearer definitions, expanded exemptions, and more detailed compliance procedures.
This evolution reflects Saudi Arabia's commitment to creating a more investor-friendly real estate market aligned with Vision 2030 objectives.
What types of real estate transactions are subject to RETT under this law?
RETT applies to virtually every type of property ownership transfer in Saudi Arabia.
Direct transfers include sales and purchases of residential properties, commercial property transactions, undeveloped land transfers, gifting of properties, inheritance distributions, long-term usufruct rights exceeding 50 years, and lease-to-own arrangements.
Indirect transfers also fall under RETT, including sale of shares in "real estate companies" (companies where property assets represent 50% or more of total assets), transfer of shares that result in ownership change of underlying properties, and corporate restructuring involving property assets.
The tax applies regardless of whether the property is developed or undeveloped, documented or undocumented. Even informal property transfers must pay RETT within 30 days.
It's something we develop in our Saudi Arabia property pack.
What is the current RETT rate and who is responsible for paying it—the buyer, seller, or both?
The current RETT rate is 5% of the transaction value, with the seller bearing primary legal responsibility for payment.
| Aspect | Details |
|---|---|
| Tax Rate | 5% of transaction value |
| Primary Responsibility | Seller (transferor) |
| Joint Liability | Buyer can be held liable if involved in non-payment |
| Payment Agreement | Parties can agree to split costs, but seller remains legally responsible |
| Valuation Base | Fair market value (ZATCA can reassess if undervalued) |
While many transactions involve negotiations where buyers agree to cover part or all of the RETT cost, the seller cannot escape legal responsibility if the tax remains unpaid. If ZATCA determines that the buyer participated in tax evasion or non-payment, they can pursue the buyer for the unpaid amount.
Don't lose money on your property in Saudi Arabia
100% of people who have lost money there have spent less than 1 hour researching the market. We have reviewed everything there is to know. Grab our guide now.
How does the RETT law apply specifically to foreign property buyers or investors?
Foreign property buyers in Saudi Arabia face the same 5% RETT rate as Saudi nationals, with no discriminatory treatment.
Key points for foreign investors include equal treatment with the same 5% RETT on all qualifying transactions, no special exemptions (unlike Saudi first-time homebuyers who get SAR 1 million exemption), and awareness that while RETT applies equally, foreign ownership remains restricted in certain areas like Mecca and Medina.
Double taxation depends on tax treaties between Saudi Arabia and the buyer's home country. Foreign investors using Saudi companies to hold property still pay RETT on share transfers if the company qualifies as a "real estate company."
This equal treatment under RETT law demonstrates Saudi Arabia's commitment to creating a fair and transparent property market for international investors.
What's the difference between RETT and VAT in real estate deals, and when does each apply?
The distinction between RETT and VAT is crucial for understanding Saudi property costs.
Since October 2020, property transfers are exempt from VAT and only subject to RETT. However, VAT still applies to construction costs, commercial property rental income, property management services, and real estate agent commissions, all at 15%.
| Tax Type | RETT | VAT |
|---|---|---|
| Rate | 5% | 15% |
| Applies to | Property ownership transfers | Goods and services |
| In Real Estate | All property sales and transfers | Construction materials, labor, commercial rent |
| Who Pays | Seller (on property transfer) | Buyer (on services/materials) |
| Introduced | October 2020 (replaced VAT on transfers) | 2018 (still applies to services) |
| Recoverability | Not deductible for income tax | Input VAT recoverable for businesses |
Are there any exemptions or special cases under the RETT law, and who qualifies for them?
The RETT law includes extensive exemptions designed to support specific economic and social objectives.
First-time Saudi homebuyers are exempt on the first SAR 1 million of purchase price, must be Saudi national's first home, requires certificate from Ministry of Housing, and developers claim refund after paying full RETT.
Family transfers including those between spouses, to relatives up to third degree, and inheritance distributions are fully exempt with proof of relationship required. Corporate exemptions cover mergers and acquisitions, IPOs, capital increases through property contribution, and corporate restructuring within the same group.
Charitable and public transfers to registered charities, endowments (Waqf), and government agency transfers for public benefit are also exempt. Other exemptions include court-ordered sales, temporary transfers as loan collateral, and subdivision among original owners.
It's something we develop in our Saudi Arabia property pack.
What parts of the property transaction process are most affected by RETT—documentation, timeline, fees?
RETT significantly impacts three key areas of property transactions.
Documentation requirements now include mandatory registration on ZATCA's digital platform, detailed property information requirements, supporting documents for exemption claims, inability to proceed to notary without RETT clearance, and a complete digital trail for all transfers.
Timeline impact includes an additional step before notarization, 30-day payment deadline from transaction date, processing time at ZATCA (usually 1-3 days), delays incurring 2% monthly penalties, and total transaction time increased by 3-7 days.
Fee structure changes mean 5% RETT is a major upfront cost, with late payment penalties of 2% monthly (max 50%), potential need for professional valuation, legal fees for complex exemptions, and total transaction costs increased by 5-7%.
We did some research and made this infographic to help you quickly compare rental yields of the major cities in Saudi Arabia versus those in neighboring countries. It provides a clear view of how this country positions itself as a real estate investment destination, which might interest you if you're planning to invest there.
What has changed with the introduction of RETT compared to the previous tax regime?
The shift from VAT to RETT brought substantial changes to Saudi Arabia's property market.
The tax rate reduction from 15% VAT to 5% RETT represents a 10% savings in transfer tax. This significant reduction has made property transactions more affordable and accessible for both local and international investors.
Expanded exemptions now include new corporate transaction exemptions, broader family transfer exemptions, increased first-time buyer support, and more clarity on qualifying transactions. The simplified compliance features a single tax instead of complex VAT calculations, digital platform for all registrations, clearer documentation requirements, and standardized valuation procedures.
Penalty reductions changed late payment fees from 5% to 2% monthly with a maximum penalty capped at 50% of tax. The market impact has been substantial with lower transaction costs stimulating market activity, increased transparency in property deals, better tracking of market transactions, and support for Vision 2030 homeownership goals.
What aspects of property taxation or ownership remain unchanged despite the RETT law?
Several fundamental aspects of Saudi property ownership remain constant despite the introduction of RETT.
Saudi Arabia still doesn't impose annual property taxes on residential properties, maintaining its position as one of the few countries without this recurring cost. The White Land Tax continues to apply to undeveloped urban land as a separate measure from RETT.
Foreign ownership rules and restrictions in holy cities and certain areas remain unchanged. The property title system and registration requirements continue as before, while local municipality fees for services persist. Income tax rules on rental income and Zakat obligations for Saudi individuals and companies remain the same.
This stability in other areas of property taxation provides predictability for long-term investors while RETT modernizes the transaction process.
What areas of the RETT law are still unclear or inconsistently enforced in practice?
As of June 2025, several areas of RETT implementation require clarification.
Valuation disputes remain problematic with ZATCA's reassessment criteria being subjective, no clear appeals process for valuation disagreements, limited guidance on "fair market value" determination, and inconsistent treatment of unique properties.
Complex corporate transactions face challenges with "acting in concert" definition needing clarification, indirect transfer thresholds varying in interpretation, group restructuring exemptions having unclear boundaries, and cross-border transaction treatment being inconsistent.
Exemption documentation requirements vary by ZATCA office, family relationship verification standards differ, corporate exemption conditions are open to interpretation, and clawback provisions enforcement is unpredictable. Digital platform issues include system downtime affecting payment deadlines, limited English language support, incomplete integration with other government systems, and unclear error correction procedures.
Enforcement variations mean different ZATCA offices apply rules differently, penalty waivers are granted inconsistently, rural versus urban enforcement gaps exist, and treatment of historical transactions varies.
It's something we develop in our Saudi Arabia property pack.
What are the long-term implications of the RETT law for foreign investors and the Saudi real estate market overall?
The RETT law positions Saudi Arabia's property market for significant long-term transformation.
For foreign investors, enhanced transparency attracts institutional investors, fixed 5% rate enables accurate investment modeling, digital systems reduce administrative complexity, lower transaction costs improve net yields, and clear tax obligations facilitate property disposals.
| Impact Area | Implications by 2030 |
|---|---|
| Market Access | Enhanced transparency attracts institutional investors |
| Cost Predictability | Fixed 5% rate enables accurate investment modeling |
| Compliance Burden | Digital systems reduce administrative complexity |
| Investment Returns | Lower transaction costs improve net yields |
| Exit Strategies | Clear tax obligations facilitate property disposals |
Market-wide implications include increased market activity with transaction volumes expected to grow 15-20% by 2027, enhanced transparency through digital registration creating comprehensive market database, and foreign investment growth expected to reach $15 billion annually by 2028.
Economic diversification will see real estate sector contribution to GDP projected to reach 10% by 2030, with job creation in property services and development. Regulatory evolution expects further refinements to exemptions by 2026, integration with other government services by 2027, and possible introduction of variable rates for different property types.
The RETT law fundamentally supports Saudi Arabia's Vision 2030 objectives by creating a more efficient, transparent, and attractive property market for both domestic and international investors.
Conclusion
This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.
The Real Estate Transaction Tax (RETT) has transformed Saudi Arabia's property market since its introduction in 2020, creating a more transparent and investor-friendly environment with its 5% flat rate.
As the Kingdom continues to develop its real estate sector under Vision 2030, understanding RETT's implications becomes crucial for anyone considering property investment in Saudi Arabia, whether local or international.
Sources
- PWC - Saudi Arabia: New RETT Implementing Regulations (2025)
- Dhruva Consultants - KSA RETT Law Alert (2025)
- Ghazzawi Law Firm - Real Estate Transaction Tax Law Insights
- KPMG Saudi Arabia - Real Estate Transaction Tax Services
- EY Global - Saudi Arabia Issues Real Estate Transaction Tax Law
- ClearTax - RETT Saudi Arabia Guide (2024)
- Deloitte Middle East - VAT and Real Estate Transaction Tax
- Arab News - Saudi Arabia introduces 5% tax on real estate transactions (2025)
- ZATCA - Official RETT Guidelines
-Saudi Arabia Real Estate Market Analysis
-Jeddah Real Estate Market Trends
-Dammam Real Estate Market Overview
-Riyadh Real Estate Market Update
-Can Non-Saudis Own Property in Saudi Arabia?
-New Real Estate Law for Foreigners in Saudi Arabia
-Medina and Mecca Property Rules for Foreigners
-Can Foreigners Now Own Property in Saudi Arabia?
-Buy to Rent Out in Saudi Arabia Guide
-Are Jeddah Property Prices Going Up?
-How to Buy a House in Saudi Arabia
-Saudi Arabia's New Investment Law Explained