The Imlak Real Estate newspaper publishes details of the rules and procedures for licensed real estate developers as persons eligible for reimbursement value-added tax issued pursuant to a decision of the Board of Directors of the Zakat, Tax, and Customs Authority, taking into account the rules that have been introduced regarding the tax.

First: A licensed real estate developer that takes one of the following legal forms (a sole proprietorship under the Commercial Register—a real estate investment fund—a cooperative institution or association – any legal form under the Companies Law), and who meets all the qualification requirements set forth in Ministerial Decision No. (1754) dated 15/4/1442 AH issued by the Minister of Finance—and any amendments thereto— (the Ministerial Decision) may submit an application to the Authority to be recognized as a qualified real estate developer eligible to recover input tax incurred and paid on its tax-exempt supplies in accordance with subparagraph (a) of paragraph (1) of Article (30) of the Executive Regulations of the Value Added Tax pertaining to the supply of real estate by way of transfer of ownership or disposal as an owner (real estate supplies eligible for refund).

Second: The Authority shall review the application and verify that the licensed real estate developer meets all the requirements and criteria mentioned in the aforementioned ministerial decision, and may request documents confirming this; and if they are met, the Authority shall submit a list of the names of licensed real estate developers who meet all qualification requirements and criteria to the Minister of Finance for approval in accordance with the provisions of paragraph (1) of Article (70) of the Regulation.

Third: If, upon verification, the Authority determines that the licensed real estate developer does not meet all the requirements and criteria mentioned in the ministerial decision when submitting an application to the Authority for registration as a person eligible for reimbursement, the Authority shall reject the application and notify the developer thereof, provided that the notification includes the reasons for the rejection, and the developer may submit a new application to the Authority after fulfilling all the requirements and criteria related to qualification.

Fourth: If the Minister of Finance approves the inclusion of licensed real estate developers who meet the qualification criteria and requirements on the list of persons eligible for recovery, the Authority shall issue a personal identification number to each eligible real estate developer, and they must include that number in all refund requests and correspondence with the Authority.

Fifth: Upon issuance of the Authority’s approval, an eligible real estate developer shall be entitled to claim a refund of the value-added tax paid on supplies of goods or services related to real estate supplies eligible for refund, effective from the date the developer submitted the registration application to the Authority. and the Authority’s Board of Directors may—in exceptional cases determined by the Board—allow the tax to be refunded from a date prior to the date the developer fulfilled all eligibility requirements.

Sixth: The following conditions must be met when submitting a refund request:

A. The real estate subject to the eligible real estate supply must be owned by the real estate developer pursuant to official documents, and, in the case of real estate investment funds, the property subject to the eligible real estate supply must be held by the fund’s custodian appointed as such in accordance with the regulations and instructions of the Capital Market Authority.

B. Or the real estate developer must hold such property as a purchaser under a finance lease agreement ending in ownership, or a lease agreement ending in ownership from a legally licensed entity, provided that all of the following conditions are met:

1- The contract must include the lessee’s right to own the property or a promise thereof.

2- The contract must include a payment schedule that specifies the property rent and the ownership right separately.

3- The tenant must maintain regular financial records (financial statements) throughout the term of the contract.

C. Or, the property subject to the redemption request must be designated for an off-plan sales project in accordance with the regulations, rules, controls, and instructions in force in the Kingdom, and a decision has been issued by the Off-Plan Sales and Leasing Committee authorizing one of the off-plan sales projects, and it is being developed by a qualified real estate developer pursuant to a partnership agreement between the developer and the person who owns the property as per official documents, provided that the transfer of the property subject to redemption in favor of the real estate developer eligible for redemption—pursuant to the partnership agreement—has been disclosed in accordance with the Executive Regulations of the Real Estate Transactions Tax.

D. Or the property subject to the refund request must be designated for an off-plan sales project in accordance with the laws, regulations, controls, and instructions in force in the Kingdom, and a decision has been issued by the Off-Plan Sales and Leasing Committee granting a license, provided that the property is owned by the State and designated for the Ministry of Municipal, Rural Affairs, and Housing, and is being developed by a qualified real estate developer pursuant to a partnership agreement between the developer and the Ministry, either directly or indirectly.

Seventh: A qualified real estate developer may submit a refund request for each monthly, quarterly, or calendar year period to recover the value-added tax paid during that period, as specified in the registration application and in accordance with the procedures established by the Authority, and the qualified real estate developer may change the refund period by submitting a request to the Authority explaining the reasons for the change, If the request is approved, the change shall take effect from the beginning of the refund period following the date of approval of the request, and the Authority shall notify the qualified real estate developer of the approval of their request prior to the change taking effect, The Authority may also change the recovery period on its own initiative, provided that the change takes effect at the beginning of the following calendar year, and the Authority notifies the qualified real estate developer thereof at least 30 days before the start of the calendar year in which the change takes effect.

Eighth: A qualified real estate developer eligible for a refund may not submit more than one refund request per refund period, and in all cases, refund requests must be submitted within a period not exceeding six months from the end of the relevant refund period.

Ninth: The refund application must include the tax paid on goods or services for which a tax invoice was issued within the refund period, and if refund requests are submitted for each monthly or quarterly period, the eligible real estate developer may claim a refund of the tax paid under a tax invoice issued on a date prior to the refund period, provided that such date does not precede the beginning of the calendar year to which the refund request relates, provided that it is included in any refund request for any subsequent refund period, up to a maximum of the request for the last period of the calendar year to which the refund relates.

Tenth: Notwithstanding Section 9 of these Rules and Procedures, a real estate developer registered with the Authority as a person eligible for a refund prior to the effective date of these rules and procedures may include in the first refund request due to be submitted to the Authority after the effective date of these rules and procedures all tax invoices related to tax paid thatreclaimed as of the date he was deemed an eligible person by the Authority, subject to the rules and procedures regarding goods and services tax that may not be claimed for refund.

Eleventh: Upon submitting a refund request to the Authority, the eligible real estate developer must possess the books, records, and documents evidencing their entitlement to the refund, specifically the tax invoice related to the supply subject to the refund, issued in the name of the qualified real estate developer, and containing all details regarding the goods or services associated with the property subject to the refund request, in addition to documents evidencing payment of the tax subject to the refund, A qualified real estate developer may not claim a refund of tax paid under simplified tax invoices that do not bear the name of the qualified real estate developer.

Twelfth: A qualified real estate developer may not claim a refund of tax related to the supply of goods or services specified in Article (50) of the Value-Added Tax Implementing Regulations that are not considered related to the developer’s economic activity, nor may they claim a refund for unpaid tax or tax related to property ineligible for a refund, whether because the property is non-residential property used or to be used for taxable supplies by way of lease or license, or because the property is a residential property used or to be used in tax-exempt supplies by way of lease or license.

Thirteenth: If the property subject to the refund request is used or will be used for both refundable and non-refundable real estate supplies, the eligible real estate developer may claim a refund only for the tax paid in connection with real estate supplies eligible for a refund, and if the tax incurred and paid relates to both eligible and ineligible real estate supplies and the tax paid associated with the eligible real estate supply cannot be determined independently, the refundable tax shall be determined using the proportional input tax deduction method set forth in Article 51 of the Value Added Tax Implementing Regulations.

Fourteenth: If the eligible real estate developer pays a portion of the tax invoice amount subject to the refund request without explicitly indicating that the amount paid refers to the tax due in respect of that invoice, the tax shall be refunded only to the extent of the tax calculated on the amount paid.

Fifteenth: If an eligible real estate developer claims a tax refund in error or without justification, they must, on their own initiative—and as soon as they become aware of it—repay an amount equal to that amount to the Authority, and the Authority shall determine the necessary procedures for this.

Sixteenth: The Authority may, at any time- conduct an audit of the real estate developer eligible for a refund for the purpose of verifying compliance with the provisions of the Value-Added Tax Law, its implementing regulations, and the decisions, controls, and standards related to refund requests for real estate supplies eligible for a refund, and it may apply to such developer the provisions set forth in Article (64) of the Regulations; and if it is established to the Authority—at any time— that the eligible real estate developer has claimed a refund in error or without justification, it may issue an assessment to that developer specifying the amount of tax that was claimed by him in error or without justification, and such amount shall be deemed a tax due and payable to the Authority as of the date of deposit of that amount into the qualified real estate developer’s bank account.

Seventeenth: A qualified real estate developer entitled to a refund has the right to object to the Authority’s decisions in accordance with the rules of procedure of the committees adjudicating tax violations and disputes.

Eighteenth: These rules and procedures shall be considered an integral part of and a supplement to the provisions set forth in paragraph (14) of Article (70) of the Executive Regulations of the Value Added Tax Law, and in the event of any conflict with the provisions of Article 70 of the Regulations, these rules and procedures shall prevail over those provisions.