Real Estate Transaction Tax Law

Purpose and scope

• Imposes a 5% tax on real-estate dispositions whatever the property's condition, form or use; the Zakat, Tax and Customs Authority applies it (Articles 1 and 2).
• A disposition is any act transferring ownership of property, or its use permanently or for more than fifty years, directly or indirectly, such as through a real-estate company (Article 1).

Key rules, rights and obligations

• Tax is charged on the agreed value if within fair market value, and a disposition is taxed only once where the parties, property and value are the same (Article 2).
• Main exemptions: division of an estate, gifts to a waqf or charity, expropriation, a documented gift to a spouse or relatives up to the third degree, executing a documented will, a court-ordered forced sale, a temporary transfer as security for finance, and contribution in kind to a company under conditions (Article 3).
• Tax falls due on the date of the disposition, which is the date of its documentation, and is paid then or earlier (Articles 4 and 5).
• The transferor is liable for the tax, and the transferee is jointly liable if it caused non-payment (Article 7); fictitious or concealed dispositions to avoid the tax are prohibited (Article 6).

Violations, penalties and common problems

• Tax evasion: a fine of up to three times the evaded tax, also for anyone who took part or helped (Article 15).
• Late payment: 2% of the unpaid tax for each month or part of a month, up to 50% (Article 15).
• Other breaches: a fine of up to the tax due or fifty thousand riyals, whichever is higher; penalties do not prevent collection of the tax (Articles 15 and 16).

Procedures and key deadlines

• Within three years of the disposition the Authority may check the declared value, recalculate and claim the tax (Article 8); tax overpaid, paid in error or paid on an incomplete disposition is refunded (Article 9).
• A decision may be challenged before the Authority within sixty days of notice; it decides within ninety days, and if it rejects the challenge or does not decide, an objection may be filed with the competent body (Article 17).

An advisory summary prepared by Al-Bayan Al-Wadih Law Firm. It is not an official text and does not replace the law, its implementing regulations, or advice from a specialised lawyer. The official published text and its amendments prevail.