GCC Indirect Tax Weekly Digest
October 6, 2020
Major real estate taxation changes
A new Royal Decree, number A/84 was issued on 1 October 2020 and contains very significant changes to the way in which property and land sales will be taxed in the Kingdom of Saudi Arabia (KSA).
Subject to further clarifications, sales of commercial, residential and any other real estate are exempt from Value Added Tax (VAT) from 4 October 2020.
However, a new Real Estate Transaction Tax (RETT) also took immediate effect on this date. It functions in a similar manner to a stamp tax where there is a transfer of a property or development and will apply at a 5% rate. The new tax falls under the purview of the General Authority for Zakat and Tax (GAZT).
In good news for Saudi citizens, they will be relieved from having to pay any tax on the first sale of a property up to the value of SAR 1M.
For those involved in the construction and development of real estate, there will be a mechanism whereby VAT will be refunded for those developers that are on a special list that will be regularly updated in conjunction with the Ministry of Finance and the GAZT.
GAZT has published the RETT Regulations in Arabic. In addition, GAZT has published a guide in Arabic on the new RETT. The guide covers the following topics:
- An overview of RETT;
- Difference between VAT and RETT;
- VAT before exempt and after exempt;
- Real Estate transactions subject to RETT;
- Exceptions of RETT;
- Procedures of RETT payment;
- Violations and penalties; and
- Interactive and useful links to examples and explanations;
Finally, Board Decision 1-5-20 has been published and updates the VAT implementing regulations. Overall, sixteen articles in the Regulations have been amended. Most concern the new real estate exemption, or the removal of now-redundant paragraphs which had been specific to the collection of VAT on real estate in certain scenarios. However, there are some other small amendments, such as a new paragraph in Article 43 which states rules for the date of import.
Tax amnesty extended to 31 December 2020
The tax amnesty in KSA that commenced on 18 March 2020 has now been extended for a third period, until 31 December 2020.
The extension will provide further relief to taxpayers from the financial and economic impact on the private sector due to COVID-19. The fundamentals of the amnesty will continue to allow late registrations, corrections and amendments to all returns (VAT/Withholding tax, etc.) to occur without penalties (i.e. this applies to periods before 18 March 2020).
However, in a significant (temporary) change in approach, taxpayers that currently have open objections with the GAZT (as well as appeals with the competent judicial authority where a final decision has not been issued) will also be able to avail of the amnesty on the basis that the principal amounts under dispute are paid (or request it to be paid in installments) to the GAZT on the provision that the objection (or appeal) is subsequently withdrawn. On this basis, any penalties that may have been levied will be withdrawn.
Oman Tax webinar on 20 October 2020
We are pleased to inform you that we will be hosting a tax webinar series throughout the rest of 2020, where our experts will discuss the latest tax developments in Oman.
Our next webinar will be held on 20 October 2020 at 12:00PM Muscat time. We look forward to having you join us.
Click here to learn more and register for the webinar.
This digest is for information purposes only and should not be construed as advice. It does not necessarily cover every aspect of the topics with which it deals. You should not act upon the contents of this alert without receiving formal advice on your particular circumstances.