Guide to Real Estate Transaction Tax (RETT) in Saudi Arabia
If you're selling, buying, or transferring ownership of real estate in Saudi Arabia — an apartment, villa, vacant land, or even a gift between relatives — a tax entirely separate from VAT applies to that transaction. This guide explains the rate, who pays it, and the full exemption cases.
Guide steps
What is the Real Estate Transaction Tax?
An indirect tax at a flat rate of 5% of the total value of the real estate transaction (sale, ownership transfer, exchange), enacted under Royal Order No. A/84 in October 2020 to replace the application of VAT (15%) on real estate transactions — meaning you pay 5% instead of 15% when buying residential property, not both. The tax becomes due when the ownership transfer is documented with the competent authority (notary or the real estate transfer platform), and is administered through the Zakat, Tax and Customs Authority (ZATCA) portal.
How is it calculated?
The basic calculation is simple: transaction value × 5%. Example: a property or land worth 1,000,000 SAR → tax due of 50,000 SAR. Vacant land is subject to the same rate when ownership is transferred, with no special exemption of its own. The value used is the actual transaction value as documented in the contract, not an estimated market value if it differs — the Authority may review the declared value in justified cases.
Who actually pays it?
The law does not conclusively specify one party as always bearing the tax; this is usually settled by the contract between seller and buyer or by prevailing market custom. In practice, many owners have been observed to fold the tax into the property price indirectly (raising the price to cover it), especially during periods of slower liquidity. Make sure who bears the tax is explicitly clarified in the sale contract before signing, to avoid any later dispute.
First-home exemption for Saudi citizens
The state bears the tax on a Saudi citizen's first home up to a maximum of 1,000,000 SAR of the property value — i.e. a full exemption if the value is 1,000,000 SAR or less. Conditions: the buyer must be a Saudi national, the property must genuinely be their first home, the property must be residential (apartment, villa, duplex, townhouse), and an entitlement certificate must be obtained from the Ministry of Housing. Important note: this support typically does not cover vacant land — it is specifically tied to a residential home under defined conditions, so buying vacant land for the first time does not automatically mean an exemption.
Gifts, inheritance, and endowments: other exemptions
Fully exempt from the tax: gifts between first-degree relatives (father, mother, children, spouse) when officially documented as a gift — with some updates extending this to more distant degrees of kinship in specific cases. Also exempt are the distribution of a legal inheritance among heirs, and gifts or donations directed to government bodies or officially licensed charitable and non-profit organizations in the Kingdom.
Property tax or real estate transaction tax? Don't confuse the two
The difference is fundamental: the Real Estate Transaction Tax (5%) is imposed only on the act of ownership transfer (sale, documented gift, exchange), while any other obligation tied to owning the property (such as vacant-land fees, if applicable, or municipal fees) is an entirely separate system with its own rules. Don't assume that paying the Real Estate Transaction Tax exempts you from any other real-estate obligation that may apply to your property.
Quick tips
- Clarify in the sale contract who bears the Real Estate Transaction Tax before signing — the law does not conclusively bind one party.
- Don't assume the first-home exemption applies automatically; check your entitlement certificate from the Ministry of Housing first.
- Officially document any real-estate gift as a gift if you want to benefit from the relatives' exemption — an undocumented transfer may be treated as a taxable sale.
- Consult the ZATCA portal directly for any complex case (exchange, restructuring, multiple partners) instead of relying on personal judgment.
- Consult a licensed accountant or the Authority directly before any high-value real estate transaction.
Frequently asked questions
What is the Real Estate Transaction Tax rate?
A flat 5% of the real estate transaction value (sale or ownership transfer), enacted under Royal Order No. A/84 in October 2020 to replace the application of VAT (15%) on real estate.
Who pays the Real Estate Transaction Tax, the seller or the buyer?
The law's principle is that the tax is imposed on the transaction itself and is borne by whoever the contract or prevailing custom specifies — in practice the seller often folds it into the price, or the two parties agree to split it or assign it to the buyer. The details are settled by the contract between the parties, not by a general rule binding one party.
Is vacant land subject to the Real Estate Transaction Tax?
Yes, vacant land is subject to the same 5% rate when ownership is transferred, with no special exemption of its own compared to a built property.
What are the conditions for the first-home tax exemption?
The state bears the tax on a Saudi citizen's first home up to a maximum of 1,000,000 SAR of the property value, provided the property is residential (apartment, villa, duplex, or townhouse) and the buyer obtains an entitlement certificate from the Ministry of Housing. Vacant land is typically not included in this exemption.
Is a gift between relatives exempt from the tax?
Yes, gifts between first-degree relatives (father, mother, children, spouse) are fully exempt when documented as a gift, as is the distribution of inheritance among legal heirs and gifts to officially licensed government or charitable bodies.