Amendments proposed to the RETT Implementing Regulations

The Real Estate Transaction Tax (RETT) was introduced in the Kingdom of Saudi Arabia (KSA) with effect from 4 October 2020 – below follows some important amendments to the Implementing Regulations which were published by the Zakat Tax and Customs Authority (ZATCA) on 15 December 2021.  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, in relation to the exemptions:
   • The exemption under Article 3 (A.2) has been modified to allow for the exemption to apply for transfers of real estate property by Waqf/licensed charities at any time as opposed to the earlier scenario where the exemption was available only if the transfer was made at the time of original establishment of the entity. This helpful change allows existing Waqfs and licensed charities to avail of this exemption if already established.
   • The scope of exemption under Article 3 (A.6) has been extended. Going forward, the donation of real estate property to a relative, up to third degree, shall be exempted (earlier the exemption was restricted to a second degree relative). This exemption is subject to a condition that for a period of three years from the date of certification of the donation, first transferee does not re-dispose of the donated property to a person who does not qualify as up to a third degree relative of the original donor.
   • Further, the definition of first, second, and third degree relatives has been specifically added in the Regulations.
   • The disposal of property pursuant to a legally certified Shariah compliant will be exempt without any capping. Earlier, there was a cap of the exemption being restricted to disposals up to one quarter of the testator’s estate.
   • In relation to the exemption under Article 3 (A.10) for in-kind contribution of real estate, joint ventures have been excluded from the scope of the exemption. 
   • The residual category wherein a decision on the exemption on any matter could be made by the Finance Minister, has been deleted.
2. In relation to specified transactions (items 1, 2, 4 and 7 of art. 4.a), the due date of payment of RETT shall be either the date of certification date at the notary public or legally accredited certification body.  Specifically for item 7 (i.e. off-plan sales) – the due date of payment of RETT has been de-linked from the date of signing of the contract or sale agreement.  This will be welcome news for both the vendor and customer as the RETT payment will be deferred up until such legal recognition takes place.

Deloitte’s view

The amendments to the Regulations rationalize and extend the scope of the RETT exemptions in certain cases, especially in relation to the transfer to charitable Waqf/licensed charity and on disposal of property pursuant to a legally certified Shariah compliant will without any cap.

However, the deletion of the residual category (Article 3, A 15) empowering the Finance Minister to apply his discretion as to the applicability of RETT means that the exemptions will not be more widely applied.

We are in constant communication with the General Authority of Zakat and Tax (GAZT) and will keep you appraised of further developments.