Insights

New exemptions proposed to be introduced in the RETT Implementing Regulations

28 June 2022 - After the implementation of the Real Estate Transaction Tax (RETT) in the Kingdom of Saudi Arabia (KSA) which came into effect from 4 October 2020, the RETT Implementing Regulations have been amended twice to date. On 27 June 2022, the Zakat Tax and Customs Authority (ZATCA) proposed further amendments to the Implementing Regulations. The official publication, released in Arabic, is available here for your reference. Broadly, the key amendments proposed are as follows:

  1. Amendments to Article 3 – introduction of new exemptions:
    • Article 3 (A.16) has been introduced to exempt from RETT the transfer of real estate by a natural person to a company (established in the KSA), where such natural person (making the transfer) owns directly or indirectly 100% of the shares or stocks of that company. This exemption is subject to conditions that there should be no change in shareholding percentage in such company for a period of 5 years from the date of transfer of real estate. 
    • Article 3 (A.17) has been introduced to exempt from RETT the transfer of real estate between companies with a 100% common shareholding directly or indirectly, i.e., 100% shares of all the concerned companies are held by one person (legal or natural). Again, this exemption is subject to condition that there should be no change in shareholding percentage in such companies for a period of 5 years from the date of transfer of real estate. In essence, this allows for “RETT Grouping” relief to apply in certain circumstances.
    • Article 3 (A.18) has been introduced to exempt from RETT the transfer of real estate by any person to a real estate developer licensed to engage in off-plan sale and rent activities. This exemption is subject to the condition that the real estate is designated for an off-plan sales projects licensed by the Off-plan Sale and Rent Committee. This will be of particular benefit to citizens seeking to invest in housing as the cost of acquisition will be less.
    • Article 3 (A.19) has been introduced to exempt from RETT the transfer of real estate without consideration to a company (established in the KSA), whose 100% shares or stocks are owned directly or indirectly by a “private family” or a charitable endowment. This exemption is subject to condition that there should be no change in shareholding percentage in such company for a period of 5 years from the date of transfer of real estate.
    • Article 3 (A.20) has been introduced to exempt from RETT the transaction involving return of the real estate to its previous owner due to cancellation by mutual consent, of an earlier transaction which was duly notarized at the time of transfer. This exemption will apply only where the cancellation happens within 90 days of the notarization of the original transaction, the condition of the real estate remains the same and that full value of the real estate was refunded by the buyer. Property transfers can often be liable to complications and this relief will allow for an expeditious application of relief.
       
  2. Introduction of rules, providing for the following situations in which refund of RETT paid would be permissible:
    • Where RETT is paid in excess/error, or on in case of an incomplete real estate disposal (possibly referring to situations where real estate transactions do not end up being notarized after RETT was paid).
    • Where RETT was paid on a cancelled real estate transfer, which was notarized but the transfer was cancelled within 90 days – subject to other conditions mentioned in newly introduced Article 3 (A.20) are satisfied.
  3. Article 12. 4 has been introduced specifically providing that the dates and periods mentioned in the Implementing Regulations will be according to the Gregorian calendar.
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