<As Saudi Arabia seeks to simplify real estate transactions and reduce tax burdens in some cases, real estate transaction tax includes several exemptions that exempt parties from paying it in full. These exemptions vary depending on the type of real estate transaction and the party benefiting from it. These exemptions constitute an important step towards supporting a favorable investment environment and enhancing confidence in the Saudi real estate market, allowing investors and citizens wider opportunities to dispose of their properties without bearing the burden of the tax in specific cases.
<In the following lines, we will highlight the most prominent cases in which exemptions from real estate transaction tax are granted in full.
Highlights of real estate tax exemptions
Exemptions from real estate transaction tax in full include:
- Division of Estate: The exemption includes real estate transactions related to the division of an inheritance among heirs.
- Real estate endowment: Exemption for real estate transactions without consideration for a public, private or joint endowment.
- Charities: Real estate transactions made without consideration to or from a licensed charity are exempt.
- Public Entities: Real estate transactions for the benefit of a public entity, public legal persons, or projects of public benefit are exempt.
- Public Authority.
- Public Authority: Real estate transactions carried out by a public body in its capacity as a public authority.
- Public Interest Expropriation: Exemption for transactions related to expropriation in the public interest or temporary seizure of real estate.
- Family Gifts: Exemptions include real estate transactions for the husband, wife or relatives up to the third degree as a notarized gift.
- Sharia Will: Exempting real estate transactions executed based on a notarized legal will.
- Securities underwriting and trading: Exempting real estate transactions related to public subscription, trading of listed securities, and trading of investment fund units.
Exemptions related to investment projects and companies
- Disposition between an investment fund and a custodian: Exemption for temporary real estate disposition between an investment fund and a custodian or vice versa.
- In-kind shares in companies: The real estate transaction provided as an in-kind share in the capital of a company incorporated in the Kingdom is exempt under specific conditions.
- Foreign and Diplomatic Entities: Real estate transactions related to a foreign government, international organization, diplomatic or military mission are exempt under the condition of reciprocity.
- Investment Funds: Real estate provided as an in-kind contribution to the capital of an investment fund.
- Guarantee of financing or credit: exempting a temporary real estate transaction if it is for the purpose of guaranteeing financing or credit.
- Mergers and Acquisitions: Exemption for real estate transactions resulting from mergers and acquisitions between legal persons.
- Force Sale: The exemption includes real estate transactions resulting from court orders of forced sale.
Exemptions for real estate developers
- Real estate developers: Exemption for real estate transactions made to a real estate developer licensed to engage in off-plan sales and leasing activities.
- Endowments and Companies: Exempt real estate disposal without consideration to a company or investment fund wholly owned by a public or private endowment.
- Returning the property to its previous owner: The real estate disposal is exempted when the disposed property is returned to its previous owner after the real estate disposal is canceled within 90 days.
