Andersen

2022/09/19

The Board of Directors of Zakat, Tax and Customs Authority (ZATCA) approved the amendments to various articles of the Real Estate Transaction Tax (RETT) Regulations as per ministerial decision on 9 August 2022
The RETT amendments are published on the official gazette on 9 August 2022 and will take effect as of 19 August 2022.

The New added Real estate tax exemptions

• Disposal of property by a natural person or a company or enterprise established in the Kingdom who fully owns, directly or indirectly, its units or shares, provided that no change occurs in ownership percentage, for a period of five years, effective starting disposal date.
• Disposal of real estate between companies, with units or shares fully owned directly or indirectly by the same person (provided that no change occurs in ownership percentage for a period of no less than five years).
• Property disposal by any person to a real estate developer with a license to practice off-plan sale and lease activities in accordance with Saudi law.
• Excluding property disposal if made free of charge to a company incorporated in KSA and in which all units or shares are fully owned, by an offspring civil or charitable endowment, provided that no change occurs in the ownership percentage for a period of five years, starting the date of disposal.
• Excluding real estate disposal if the real estate is returned to its previous owner as a result of cancelling the authenticated disposal within a period not exceeding 90 days from the date of authentication (provided that no change occurred in the description of the property and its full value is refunded).

the real estate transaction tax new amendments were added to the previously published regulations below in the official gazette, that was published on 3 publications, last one was on 09 February 2022, that reflects the understanding of taxpayers needs and real estate industry

• The transfer of real estate by inheritance or distribution.
• The gifting of property to family or to licensed charity endowments.
• The disposal of property for a government agency or public corporate persons or entities or projects of public interest (as per laws affecting associations and civil society organizations).
• Disposing of real estate by a government agency outside the scope of economic activities.
• Forcible disposal in cases of expropriation for public benefits or temporary seizure of the property.
• Gifting property to a spouse or to relatives to third degree of affinity provided that all conditions regarding the concerned party are met, and for a period of no longer than 3 years.
• Disposal of real estate in the context of a legitimate will.
• Property transfer for temporary usage as a financial or credit guarantee.
• Ownership transfer applied on properties previously purchased under a financial lease or closed end lease (before the date of introduction of RETT).
• Disposing of real estate temporary for the reason of transferring it between a fund and a custodian or vice versa and in correspondence with the Capital Market Law.
• The transfer of property as a share-in-kind in the capital of companies (The related shares are not to be disposed of for five years and are submitted to audited financial statements).
• The disposal of a property if one of the parties of the transaction is a foreign government, an international organization, an authority, a diplomatic mission, a military mission, or a member of the diplomatic, consular, or military corps accredited to the Kingdom (conditioned by the principle of reciprocity).
• The disposal of real estate previously subjected to full VAT deduction (provided that no change occurs to the parties of the transaction or the value of the contract or its clauses).
• Disposal of real estate by a company’s partner to the company’s name (provided that the property is previously recorded in the company’s financial statements before the Regulation is effective and that audited financial records are submitted to prove it).
• Disposal of property as an in-kind – by any person- contribution to the capital of a Real Estate fund in the time of the fund establishment, provided that corresponding shares do not include funds created to rent real estate.

The new amendments allow among other benefits, transferring assets between companies or between individuals and companies, in case the property is wholly owned by the concerned parties, provided that no changes occur to ownership percentage for no less than five years. It is worth noting that transfer of property is possible from subsidiary to parent company as per the amendments.

The amendments also reflect the support to charities through excluding property disposal if made free of charge to a company incorporated in KSA and in which all units or shares are wholly owned, by an offspring civil or charitable endowment, provided that no change occurs in the ownership percentage for a period of five years, starting the date of disposal.

The new version confirms an updated understanding of taxpayers needs and real estate industry. It includes property disposal by any person to a real estate developer with a license to practice off-plan sale and lease activities in accordance with Saudi law, and real estate disposal if the real estate is returned to its previous owner as a result of cancelling the authenticated disposal within a period not exceeding 90 days from the date of authentication (provided that no change occurred in the description of the property and its full value is refunded).

Source: Saudi gazette official website

https://uqn.gov.sa/?p=17044

https://uqn.gov.sa/?p=17046