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Gulf Insider

Saudi Arabia's Real Estate Transaction Tax is A Game-Changer

Saudi Arabia's new tax rules on real estate transactions have taken effect, offering a significant boost to property ownership among its citizens. At the same time, the full benefits of the update Real Estate Transaction Tax will extend across all layers of deal-making in the sector, according to industry sources. The RETT brings in a flat 5% tax on most real estate transactions, 'including sales, transfers, and other property-related dealings, regardless of whether the parties are individuals or businesses'. The updated RETT came into effect Wednesday (April 9). When it comes to individual investors, there are specific exemptions, according to Naveen Sharma, Chairman of the Taxation Society. Family-related transfers: Transactions such as gifts between close relatives (up to the third degree), inheritance divisions, and spousal transfers are exempt from the 5% tax obligation. First-time homebuyers: Saudi citizens purchasing their first residential property are exempt from tax on properties valued up to SR1 million, with the government covering the tax for qualifying transactions2. Other exemptions: Transfers to charitable organizations, endowments, or under certain governmental housing initiatives are also RETT-exempt. 'While individuals are subject to the RETT on property transactions, these exemptions significantly reduce the tax burden for specific scenarios, particularly for Saudi nationals and family-related transfers,' said Sharma. Saudi Arabia has brought in a wave of reforms across its property market, the latest being measures taken to speed up availability of land for development and stabilize rentals in Riyadh. Then, there has also been the opening of freehold rights to foreign investors, the gains from which are starting to show up. These moves to open up the property market are backed by newly updated and transparent tax laws, which is what the RETT is all about. 'The new RETT marks a transformative step in Saudi Arabia's real estate market,' said Sharma.