Zakat, Tax, and Customs Authority Amendments to the Executive Regulations for Real Estate Transactions Tax, included amendments to a number of transactions exempt from the scope of the Real Estate Transactions Tax, most notably the exemption for a person contributing real estate they own as an in-kind contribution in exchange for investment units in a real estate investment fund, and the exemption for transferring ownership of a person’s real estate to a company in which they hold shares for the purpose of rectifying ownership, in addition to an amendment to the due date for projects (Build-Own-Operate-Transfer) projects.
The Authority clarified that the amendment to the exemption regarding the correction of ownership is that the exemption applies when a person transfers ownership of a property to a company in which he owns or previously owned shares for the purpose of rectifying ownership, provided that the property was recorded in the company’s assets prior to the effective date of the regulation and that the person was a partner in the company on the date the property was recorded among its assets, regardless of whether the person remains a partner in that company as of the date of the correction.
Expansion of the Scope of the Exception Regarding Real Estate Transactions
She added that the amendments included expanding the scope of the exception regarding real estate transactions that constitute an in-kind contribution to the capital of a real estate investment fund established in accordance with the regulations and rules of the Capital Market Authority, so that it covers all types of real estate funds regardless of their purpose, without limiting thereal estate funds aimed at initial development or construction, and without limiting the exemption to in-kind contributions made only at the time of the funds" initial establishment, provided that the fund units or shares corresponding to the real estate contribution are not disposed of until the date of the fund’s termination or liquidation, or for a period of five years from the date of registration or acquisition of the units or shares, whichever comes first.
The Authority also made an additional amendment to the provisions of the regulations, pursuant to which a change in the ownership percentage—which is required to remain unchanged for specified periods after the exception takes effect—resulting from a public offering of the company’s shares or fund units shall not be considered a breach of the condition prohibiting the disposal of the shares or units corresponding to the exempt
real estate transaction. Thus, the exemption remains in effect in such cases to encourage the public offering of company shares and fund units.
The amendments to the Executive Regulations for Real Estate Transactions Tax included a modification to the tax liability in contracts related to (Build-Own-Operate-Transfer) projects, such that the tax becomes due on the date of the actual transfer of ownership or possession to the transferee to whom such projects are transferred
pursuant to those contracts, and the tax on such contracts shall be paid within (30) days from the date of the actual transfer of ownership or possession.
View the Real Estate Transactions Tax Guide
The Zakat, Tax, and Customs Authority has invited taxpayers and interested parties to review the detailed and simplified guides on real estate transaction tax by visiting its website or contacting the Authority for any inquiries regarding the new amendments, via the call center’s unified number
(19993), which operates 24 hours a day, seven days a week, or the ”Ask Zakat, Tax, and Customs” account on the X platform (@zatca_Care), via email ([email protected]), or through live chat on the website zatca.gov.sa)).
It should be noted that the real estate transaction tax is levied at a rate of (5%) of the total value of the real estate transaction, whereby ownership of the property is transferred from one person to another, whether through sale, exchange, or other similar real estate transactions, with certain transactions exempted in accordance with the provisions of the Real Estate Transactions Tax Implementing Regulations, Furthermore, any real estate transaction must be registered on the Real Estate Transactions Portal of the Zakat, Tax, and Customs Authority, specifying the property details and the type of transaction, prior to the completion of the transfer or notarization by the competent authorities.
