Key Features 

• Persons have one Hijri year from the law's effective date to document real estate transactions conducted before RETT's implementation on October 4, 2020. This period can be extended by the Council of Ministers. Shareholders must also document any undocumented real estate transfers made in the company's name and provide proof to Zakat, Tax and Customs Authority (ZATCA). Exemption from RETT depends on whether the real estate was reported within the company's assets before RETT's implementation, along with meeting additional requirements.
• The Law defines a real estate company as any company, fund, or entity that owns real estate in Saudi Arabia, either directly or indirectly, with the intent of generating revenue through sales or rentals. To qualify as a real estate company, the fair market value of the real estate must exceed a certain percentage of the total fair market value of the entity's assets, as specified by regulations, and this percentage must be at least 50%.
• The RETT is a 5% tax applied to the transfer of real estate, including buying, selling, gifting, or inheriting properties. The tax is calculated based on the property's sale value. All real estate transactions must be registered on the Zakat, Tax and Customs Authority's real estate transaction portal, detailing the property data and type of transaction, before proceeding with official documentation with the relevant authorities.
• According to the Law, the primary responsibility for paying the RETT lies with the transferor. However, the transferee may also be held jointly responsible for the tax payment if it is proven to the ZATCA that the transferee was the reason for the non-payment of the tax.
• The Law has expanded the criteria for full exemption from RETT to include several types of transactions: those without consideration to public, private, or joint endowments; transactions involving legally licensed charitable associations; transactions related to initial public offerings, trading of listed shares, and investment fund units; transactions executed due to a forced sale order by a court; and transactions resulting from mergers and acquisitions between legal entities.
• The time limits for assessment by ZATCA regarding real estate transactions are as follows: For disclosed real estate transactions, the time limit is three years from the date of the transaction. For undocumented or undisclosed transactions, the time limit is three years from the date ZATCA becomes aware of the transaction. If there is a breach in the time limits set for RETT exemptions, there is no time limit for assessment.
• The penalty provisions have been outlined for various tax-related scenarios. For tax evasion, fines can be up to three times the evaded tax amount. If there is a delay in tax payment, a 2% penalty is applied for each month or part thereof, capping at 50% of the unpaid amount, calculated after the due period. If the due amount is amended by ZATCA, an additional penalty of 1% per month or part thereof is imposed, starting 30 days after notification. For any other legal or regulatory violations, the fine can be up to the due tax amount or SAR50,000, whichever is greater.