In brief

On 11 August 2023, a new amendment to the Saudi Real Estate Transaction Tax (RETT) Regulations was published in Umm Al Qura pursuant to Ministerial Resolution No (1331) dated 07/01/1445H.


Key observations

The amendments to the RETT Regulations largely reflect the proposed changes announced in the public consultation in June this year. The key amendments include:

  • The scope of RETT exemption by natural personal has now been extended to include KSA investment funds subject to certain conditions.
  • The RETT exemption on real estate transfers between companies within the group has been extended to include transfers of real estate between KSA companies and KSA investment funds subject to certain conditions.
  • Enhancement of the ZATCA's tax administration by committing to the guidelines and rulings issued by them (i.e., legally binding effect on the authority).

The key message is that the RETT exemption net has been revised again. When a corporate group changes its structure in a corporate reconstruction or restructuring and transfers property in KSA between group companies, it may give rise to RETT implications in KSA. It is more important than ever to observe the latest exemption scope to identify opportunities and exposures during the initial planning so that appropriate tax implications are factored in the decision‑making stage.

Overview of the latest amendments

For completeness, below is an overview of the latest amendment to the RETT Regulations:

  • Article 3(a)(16), under which the transfer of real estate by a natural person to a KSA company fully owned by that person, is exempt from RETT, has been extended to include the transfer of real estate by a natural person to an investment fund established in KSA.

In order for the exemption to apply, the fund must be fully owned directly or indirectly by the transferor, and there must be no change in the fund's ownership for a period of five years from the transfer date.

  • Article 3(a)(17), under which the transfer of real estate between companies that are fully owned by the same person is exempt from RETT, was amended such that the exemption would apply to cases in which the disposal of real estate occurs between two companies established in KSA where one is fully owned by the other.

In addition, the exemption has also been extended to include real estate transfers between KSA companies and investment funds established in KSA fully owned by such companies and the real estate transfers between companies and investment funds established in KSA that are owned by the same persons. The exemption is contingent to the requirement that there should be no change to the ownership of the fund or company for a period of five years from the transfer date.

  • A new Article 11 was added to address RETT rulings. The new Article 11 incorporates into the RETT Regulations reflects ZATCA's administration of giving binding affect to rulings and certain publications issues by ZATCA.

The new provision explains that ZATCA may issue rulings, guidelines, and circulars at its discretion. It also states that rulings, guidelines, and circulars are binding on ZATCA. Notably, the amendment makes clear that the binding content of rulings, guidelines, and circulars would not apply retroactively but rather covers periods from the date of the issuance of such material. However, ZATCA will not be bound by rulings that are based on facts that were omitted or misrepresented by the applicant or if the facts presented by the applicant differ from the actual transaction.

The amendments are effective as of the date of their publication in Umm Al Qura.

To speak with us in relation to any of the proposed changes to KSA VAT, or any tax matters or issues more generally, please contact one of the team members above. 

* * * * *

LOGO_Saudi Arabia Legal_Advisors_Jeddah

* Content prepared by Legal Advisors in association with Baker & McKenzie Limited.

Copyright © 2024 Baker & McKenzie. All rights reserved. Ownership: This documentation and content (Content) is a proprietary resource owned exclusively by Baker McKenzie (meaning Baker & McKenzie International and its member firms). The Content is protected under international copyright conventions. Use of this Content does not of itself create a contractual relationship, nor any attorney/client relationship, between Baker McKenzie and any person. Non-reliance and exclusion: All Content is for informational purposes only and may not reflect the most current legal and regulatory developments. All summaries of the laws, regulations and practice are subject to change. The Content is not offered as legal or professional advice for any specific matter. It is not intended to be a substitute for reference to (and compliance with) the detailed provisions of applicable laws, rules, regulations or forms. Legal advice should always be sought before taking any action or refraining from taking any action based on any Content. Baker McKenzie and the editors and the contributing authors do not guarantee the accuracy of the Content and expressly disclaim any and all liability to any person in respect of the consequences of anything done or permitted to be done or omitted to be done wholly or partly in reliance upon the whole or any part of the Content. The Content may contain links to external websites and external websites may link to the Content. Baker McKenzie is not responsible for the content or operation of any such external sites and disclaims all liability, howsoever occurring, in respect of the content or operation of any such external websites. Attorney Advertising: This Content may qualify as “Attorney Advertising” requiring notice in some jurisdictions. To the extent that this Content may qualify as Attorney Advertising, PRIOR RESULTS DO NOT GUARANTEE A SIMILAR OUTCOME. Reproduction: Reproduction of reasonable portions of the Content is permitted provided that (i) such reproductions are made available free of charge and for non-commercial purposes, (ii) such reproductions are properly attributed to Baker McKenzie, (iii) the portion of the Content being reproduced is not altered or made available in a manner that modifies the Content or presents the Content being reproduced in a false light and (iv) notice is made to the disclaimers included on the Content. The permission to re-copy does not allow for incorporation of any substantial portion of the Content in any work or publication, whether in hard copy, electronic or any other form or for commercial purposes.