Amendments to the executive regulations of the real estate disposal tax in Saudi Arabia

the executive regulations of the real estate disposal tax in Saudi Arabia is one of the important taxes imposed on the sale, purchase and rental of real estate.

As part of the Saudi government’s efforts to achieve tax justice and provide additional sources of income, amendments have been made to the executive regulations for this tax.

In this comprehensive guide, we will explain the main concepts and changes introduced in the executive regulations and their impact on the real estate market and investors.

You can seek the assistance of a legal advisor and request any accounting service provided by our office, CFOONLINE, the approved financial office in the Kingdom,

by communicating directly with experienced experts and specialists.

What is the executive regulations of the real estate disposal tax in Saudi Arabia?

The real estate disposal tax is a direct tax imposed on the sale, purchase and rental of real estate in the Kingdom of Saudi Arabia.

This tax aims to:

1. Achieving tax justice among the various dealers in the real estate market
2. Providing additional sources of income for the government.

Tax rates and application rates vary according to the type of real estate and the type of real estate disposal.

Major changes in the executive regulations

Several amendments have been made in the executive regulations of the real estate disposal tax in Saudi Arabia, and the most prominent of these amendments are:

1. Tax rates: Tax rates have been modified on some real estate transactions, and the rates are determined according to the types of real estate, its value, and the type of disposal.
2. Expanding the scope of application: The scope of application has been expanded to include more real estate operations, which means that a greater number of dealers in the real estate market will be obligated to pay the tax.
3. New exceptions: New exceptions have been added to some real estate transactions, which may include certain transactions of specific institutions, investors and individuals.
4. Improving administrative procedures: Administrative procedures related to filing tax returns and paying taxes have been improved, which aims to facilitate tax implementation and reduce the burden on dealers.

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The following is a table of the most prominent amendments to the executive regulations for the real estate disposal tax in Saudi Arabia for the year 2023 AD, prepared for you by specialists at CFOONLINE:

Article / paragraph	The text of the current paragraph	Proposed amendment
Amending subparagraph (16) of paragraph (a) of Article Three	16. Disposal of real estate by a natural person of a company established in the Kingdom who owns – directly or indirectly – all of its stakes or stocks, Provided that there is no change in the percentage of his ownership in the disposed company for a period of not less than five years from the date of real estate disposal.	16. Real estate disposal by a natural person of a company or investment fund incorporated in the Kingdom, and this person owns – directly or indirectly – all the company’s shares, shares, or fund units, This includes in the event that the percentage of full ownership of natural persons in the real estate and the entity disposed of is identical, provided that there is no change in the percentage of ownership of the company or fund to which it is disposed. For a period of not less than five years from the date of real estate disposal.
Amending subparagraph (17) of paragraph (a) of Article Three	17. Disposal of real estate among companies whose shares or stocks are all owned – directly or indirectly – by the same person. Provided that there is no change in the ownership percentage of that person in the company to which it is disposed of for a period of not less than five years from the date of the real estate disposal.	17. Real estate disposal between one company and another two establishments in the Kingdom, one of which owns – directly or indirectly – all the shares or stakes of the other company, The real estate disposal is between a company and an investment fund established in the Kingdom, and the company owns – directly or indirectly – all the units of the fund, and the real estate disposal is between companies or investment funds established in the Kingdom whose shares, shares or units are all owned – directly or indirectly – by the same Persons It is stipulated – in all cases – that all the shares of the company to which it is disposed of, its shares, or units of the fund to which it is disposed of, shall remain owned – directly or indirectly – by the same persons for a period of not less than five years from the date of the real estate disposal.
Adding paragraph (3) to Article Six	nothing	3. The Authority may – within a period not exceeding (three) years from the date of the real estate disposal for the purposes of calculating the tax due – estimate the value of the real estate disposal with a fixed value, which was disclosed to the Authority.
Adding paragraph (4) to Article Six	nothing	4. The Authority shall – within a period not exceeding (three) years from the date of the real estate disposal for the purposes of calculating the tax due – estimate the value of the real estate disposal of an indefinite value disclosed to the Authority.
Adding paragraph (5) to Article Six	nothing	5. The Authority shall demand payment of the tax due within a period not exceeding (three) years from the date of the real estate disposal, or from the date of its knowledge of the undocumented or undisclosed real estate disposal.
Adding a new paragraph (6) to Article Six	nothing	6. The periods mentioned in this Article do not affect the Authority’s right to claim payment of the tax due in cases where the time restrictions specified in Article 3 of the Regulations are breached.
Add Article Eleven bis	nothing	The Authority works to raise awareness among the parties to real estate dispositions and strengthen the degree of their voluntary commitment, and issues the necessary guides or tax bulletins to help them fulfill their duties. The Authority, at its discretion, may issue an explanatory decision to clarify the tax treatment of any transaction in accordance with the provisions of the Regulations. This shall be in the form of an explanatory decision issued to the applicant or published to the public. The explanatory decision shall indicate the period to which it applies. The issuance of the explanatory decision shall be in accordance with the provisions and procedures specified by the Authority. . The Authority is committed to the content of the interpretations contained in the tax guides, circulars or explanatory decisions in accordance with paragraphs (1 and 2) of this article when applying the regulations to the periods following the issuance, publication or amendment of these guides, tax circulars or explanatory decisions, without extending to the periods prior to its issuance, publication or modification. The provisions of Paragraph (3) of this Article shall not apply in the following cases: A- Violation of these interpretations of the law or regulation. B- The actual facts, activities or transactions differ from those specified in the guidelines, tax bulletins or explanatory decisions. C- Omission or misrepresentation of material facts. D- Transactions that do not meet the assumptions or requirements contained in the guidelines, tax bulletins or explanatory decisions. 5. The purpose of any document issued by the Authority in accordance with this article is to clarify how the regulations apply to a specific circumstance involving a specific set of facts. It is not intended to grant the authority to provide any exception, exemption, concession, discount, or any other advantage other than what is permitted under the Regulations.

The impact of modifications on the real estate market

The amendments to the executive regulations will have multiple impacts on the real estate market in the Kingdom of Saudi Arabia.

• Increasing real estate transaction costs can lead to changes in investment patterns and real estate prices.
• The amendments may also affect investment decision-making and the ability of investors to achieve the desired returns from real estate investments.

Guidance for investors and individuals to comply with the amendments

To ensure compliance with the new amendments to the executive regulations of the real estate disposal tax in Saudi Arabia, investors and individuals must follow some important directives:

1. View the amendments: Investors and individuals should read the full text of the amended executive regulations and fully understand its content.
2. Consult with a tax advisor: It is recommended that investors and individuals engage with a qualified tax advisor to understand the effects of the amendments on their own tax situation.
3. Updating internal tax procedures: Companies and individuals must review and update internal tax procedures to ensure that they comply with the new amendments.
4. Adherence to filing and payment deadlines: Investors and individuals must adhere to deadlines for filing and paying tax returns.
5. Monitoring future developments: Investors and individuals should monitor future developments related to taxes and amendments to the executive regulations.

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Real estate transactions for individuals

Real estate transactions by individuals represent an important part of real estate activity in the Kingdom of Saudi Arabia.

These actions include:

• Real estate sales, purchases and rentals carried out by individuals in their capacity as natural persons.
• Real estate dispositions may also include the construction of their own residential properties.

What are the real estate transactions of individuals?

The real estate disposals of individuals vary, and the real estate disposals of individuals is one of the most important factors of economic and investment activity in the Kingdom.

Real estate disposal tax first residence

The first dwelling real estate disposal tax is a temporary tax relief granted to the first dwelling purchased or built for personal use.

These exemptions are intended to:

1. Encouraging citizens to own their own homes
2. and provide adequate housing.

What is the real estate disposal tax of the first home?

Real estate disposal tax first residence:

• The first residence is exempted from paying tax upon purchase or construction.
• However, individuals must meet and fulfill the specific conditions to benefit from this exemption, such as the dwelling must be the first dwelling purchased or built.

How to register real estate tax

Individuals must register real estate disposal tax when conducting taxable real estate disposals.

They must register on the online tax platform and provide the required information, such as:

1. Property details
2. And the transaction
3. and interested parties.

Customers must adhere to the specified procedures and provide the supporting documents required to complete the registration process.

Inquiry about real estate disposal tax

Individuals can inquire about the real estate disposal tax through the electronic tax platform.

This allows them to:

1. Find out the amounts owed
2. and payment status
3. And any other tax related information.

Individuals must provide certain personal information and transaction details to access information related to the real estate disposal tax.

Method of paying real estate tax

There are several ways to pay the real estate disposal tax in the Kingdom of Saudi Arabia.

1. Individuals can use electronic payment via the online tax platform to transfer the amount due.
2. Additionally, cash is also possible.
3. Or use checks in some specific cases.

Individuals must follow the procedures specified for each payment method and ensure the successful completion of the payment process.

Real estate tax refund

In the event that some conditions and requirements are met, individuals can recover the real estate disposal tax that they paid.

Customers must submit a tax refund request and submit the required supporting documents to the tax authority.

The application and documents will be reviewed, and if the conditions are met, the amount due to the customer will be refunded.

Real estate tax on the seller or the buyer?

The methods of imposing real estate tax on the seller or the buyer vary depending on the tax classifications and applicable laws.

• In some cases, the seller may be liable to pay the tax, while in other cases the buyer may be liable to pay the tax.
• Individuals should familiarize themselves with the details and regulations in force in the Kingdom of Saudi Arabia to determine who is liable to pay the property tax in their particular case.

Conditions for exemption from real estate tax

Benefiting from the real estate disposal tax exemption in Saudi Arabia requires compliance with certain conditions.

These may include conditions such as:

1. Personal use of the property.
2. Or classifying the property as a first residence.
3. Or take advantage of approved housing programs.

Individuals should familiarize themselves with the applicable official regulations and directives and ensure that the specific conditions are met in order to obtain exemption from real estate disposal tax.

The most common questions about real estate disposal tax in Saudi Arabia

• Is the tax on the buyer or the seller?

In Saudi Arabia, real estate disposal tax is usually imposed on the seller, and the tax costs are usually borne by the seller.

However, the parties concerned must consider this tax while conducting real estate transactions and include it in the agreements and sales and purchase contracts.

• What are the conditions for exemption from real estate disposal tax?

The conditions for exemption from the real estate disposal tax vary according to:

1. The type of real estate disposal.
2. The authority that regulates the tax.

Customers must verify and meet the specific conditions to benefit from the available exemptions.

• Is it possible to recover the real estate disposal tax?

Individuals or companies can recover the real estate disposal tax if certain conditions and requirements are met.

Customers must submit a tax refund request and submit the necessary documents to the competent authority to consider the request and take the necessary measures.

• How much is the value-added tax rate in Saudi Arabia?

The Value Added Tax (VAT) rate in Saudi Arabia is 15%.

This percentage is applied to goods and services covered by the tax system in the Kingdom.

• How do I get a real estate transaction tax invoice?

You can obtain a real estate disposal tax invoice by:

• Communicate with the authority responsible for imposing the tax in the Kingdom of Saudi Arabia.

This requires providing the necessary information about the real estate transaction, such as:

• Block number.
• and date of transaction.
• and details of the parties involved.

The competent authority will issue a detailed invoice showing the amount of tax due and any other relevant information.

at the end:

In our article, we have reviewed for you the amendments to the executive regulations for the real estate disposal tax in Saudi Arabia,

the  the executive regulations of the real estate disposal tax in Saudi Arabia for the year 2023 AD.

In addition to other important points such as real estate disposals of individuals, the first home, how to register, methods of paying and refunding tax, exemption conditions, and the most common questions.

We at CFOONLINE, as the first accredited financial office in Saudi Arabia, are pleased to provide our various accounting services to our clients

and the free direct advice that you can get from specialists and consultants with extensive experience.

Where the tax advisor can provide the necessary guidance, analyze the impacts and suggest appropriate procedures for tax compliance.

the executive regulations of the real estate disposal tax in Saudi Arabia

The most important sources:

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