The Kingdom of Saudi Arabia ratified the Unified Value-Added Tax Agreement of the Gulf Cooperation Council (GCC) and began implementing the tax system on January 1, 2018, and has committed to imposing it at the lowest rate globally (5%) on certain goods and services, such as food, transportation, real estate, education, and others, as detailed in the executive regulations issued by the General Authority for Zakat and Income.
Since the real estate and housing sectors are among the most important development sectors, with a pressing need for their services in providing housing for citizens, concerns have arisen regarding the impact of the value-added tax on the future of the residential real estate market, as the sector had previously been in a slump due to weak buying and selling activity. Consequently, the Ministry of Housing has begun working diligently to allay these fears and revitalize the real estate market by launching initiatives under a housing program to provide integrated housing solutions and expand options for citizens to obtain suitable housing, including an initiative whereby the government covers the VAT on the first home purchase for citizens, up to 850,000 riyals, to reduce the cost of owning a suitable home, enabling self-construction for those who own land and wish to obtain financing to build on it, and supporting them with financing of up to 500,000 riyals, offering a profit-subsidized mortgage loan to purchase a ready-to-move-in housing unit from the market through approved lenders to quickly enable citizens to obtain suitable housing; and a housing support initiative for active-duty military personnel (on active duty) to acquire housing with a down payment of 140,000 riyals. We note from the above that the Ministry of Housing is highly focused and committed to addressing the housing problem for all segments of society to mitigate the negative impact of the value-added tax, and its continued provision of housing solutions will yield positive results, thereby fulfilling the Kingdom’s Vision 2030 by raising the homeownership rate to 60 percent by 2020 and reaching 70 percent by 2030.
