VAT refunds under the Licensed Real Estate Developer Scheme in KSA has been saved
VAT refunds under the Licensed Real Estate Developer Scheme in KSA
Key considerations for land and property development companies
Real Estate Transaction Tax (RETT) was introduced in the Kingdom of Saudi Arabia (KSA) with effect from 4 October 2020 on supplies of land and property (including sales, assignments, transfers, and similar activities), subject to some exceptions. The applicable rate is 5% of the value of the land and property (and rights thereto).
Value Added Tax (VAT), in general, is no longer applicable to the sale and disposal of property, except in certain circumstances where both VAT and RETT can apply on the same transaction. Instead, the real estate supply will be treated as VAT exempt wherein related tax credits cannot be recovered through the VAT return.
A scheme known as the Licensed Real Estate Developer Scheme (LD) has been introduced allowing land and property development companies to recover input VAT on their expenses. Rules and conditions around the qualification as a LD have been issued by the Zakat, Tax and Customs Authority (ZATCA). In a recent legislative update, the ZATCA released a set of rules and procedures in relation to the VAT refunds under the LD Scheme.
This article highlights some of the key considerations that businesses who wish to pursue the LD journey should consider.