The Board of Directors of the Zakat, Tax and Customs Authority has approved the new executive regulations for the Real Estate Transactions Tax System, which came to define the mechanisms and criteria for applying the tax on real estate transactions in the Kingdom.

5% tax on any real estate transaction

The Executive Regulations of the Real Estate Disposal Tax System stipulate that a 5% tax is imposed on any real estate disposal, regardless of the condition, form, or use of the property at the time of the disposal. The tax includes real estate transactions whether they relate to the whole property or part of it, whether this part is segregated or communal. It also extends to completed, under-construction, or even off-plan properties, regardless of their legal status, whether or not the disposition is documented.

TP3T applies to any real estate transaction, regardless of the property's condition, form, and use at the time of disposal. <Regarding the value of the real estate transaction, the regulation specifies that the total value depends on any consideration, whether in cash or in kind, that is agreed upon between the concerned parties. This value must be within the limits of the fair market, taking into account any special cases that may be stipulated in the regulation.

Criteria for full tax exemption

<The regulation specifies a set of criteria for total exemption from tax, including cases in which the estate is divided according to the regulations in force in the Kingdom. Real estate transactions made without consideration, whether in cash or in kind, for the benefit of a public, private or joint endowment are also exempt, provided that the endowment is officially registered with and supervised by the endowment authorities.

The regulation sets out a set of criteria for total exemption from the tax, including cases where the estate is divided in accordance with the regulations in force in the Kingdom. The exemptions also include transactions made by or to a licensed charitable entity in accordance with the law, provided that the charitable activities carried out by these entities are aimed at achieving a public interest and are recognized as a public benefit by the competent authority.

The exemptions also include transactions made from or to a charitable entity licensed in accordance with the law. Moreover, real estate disposals made for the benefit of a public entity, a public legal person, or projects of public benefit are exempt, provided that the transferee is the concerned entity or another person who receives a direct or indirect share of the property.

Real estate disposals are also exempted.