What Is RETT? Saudi Arabia’s Real Estate Transaction Tax Explained

On 4 October 2020, Saudi Arabia made a significant structural shift in how it taxes real property. VAT — which had been applying at 5% to qualifying real estate disposals — was replaced entirely for transfer transactions by a dedicated regime: the Real Estate Transaction Tax, or RETT. The rate stayed at 5%. The regime, however, became something quite different.

RETT is not a tax on income. It is not a tax on profit. It is a tax on the act of transfer itself — imposed the moment real estate moves from one person to another, regardless of whether the transferor made any gain, whether the property is residential or commercial, and whether the transfer happens by sale, gift, court order, or corporate restructuring.

That distinction matters. A developer selling a completed villa at a loss still owes RETT at 5% of the transaction value. A family gifting property to a child may or may not be exempt — the rules are specific, and the exemption is not automatic. Getting this wrong has real financial consequences, and ZATCA has the authority to assess, investigate, and penalise non-compliance going back three years.

The regime was overhauled further when Royal Decree No. M/84 (the new RETT Law) entered force on 10 April 2025, accompanied by the Implementing Regulations issued under ZATCA Board Resolution No. 01-03-25 (24 March 2025). This article is based on the current regime as it stands under those instruments.

RETT is governed by two primary instruments:

• Royal Decree No. M/84 — the RETT Law, approved on 19 Rabi Al-Awwal 1446 H and effective from 12 Rabi Al-Thani 1446 H (10 April 2025). This is the foundational statute.
• ZATCA Board Resolution No. 01-03-25 — the Implementing Regulations, dated 24 Ramadan 1446 H (24 March 2025), which entered force simultaneously with the Law. These regulations flesh out the mechanics: how to calculate the tax, which exemptions apply and under what conditions, how and when to file, and what records must be kept.

ZATCA administers the regime under its mandate as the Kingdom’s tax and customs authority. It collects RETT, operates the electronic registration portal, conducts examinations of real estate transactions, and issues assessments where it determines the declared value understates the fair market value.

ZATCA also publishes a Detailed Guideline (currently Version 6, May 2026) that clarifies how the Law and Regulations apply to specific transaction types. Where the Guideline reflects a settled ZATCA position, it is authoritative in practice — though the Law and Regulations take precedence in any conflict.

The RETT Law applies to real estate situated in the Kingdom of Saudi Arabia. The definition is broad and includes:

• Land — any specific land area over which rights of ownership, possession, or other real rights may arise
• Everything built or constructed on land — buildings, engineering structures permanently erected on land
• Fixtures and equipment forming a fixed part of, or permanently attached to, a building or engineering structure
• Subdivided or undivided portions of real estate (an undivided interest in a jointly owned property is real estate for RETT purposes)
• Residential units, commercial units, and industrial properties
• Off-plan units — the fact that a building is not yet constructed does not remove it from the RETT scope

There is an important extension for movable property. Under Article 2(b) of the Implementing Regulations, movable property placed by its owner within real estate they own is treated as real estate if it is intended for the permanent service or exploitation of that real estate — even if it is not physically affixed. Think of permanently installed industrial machinery, built-in fixtures, or specialist agricultural equipment. These are included in the RETT base unless they can be genuinely separated from the real estate transaction.

Permits, primary and secondary rights in rem, and similar rights that are inseparable from the real estate are also treated as part of the real estate for RETT valuation purposes (Article 2(d) of the Regulations).

RETT applies to every person — individual or legal entity — who transfers real estate situated in the Kingdom. Nationality, residency, and domicile are irrelevant. A foreign company transferring Saudi real estate is subject to RETT on the same terms as a Saudi national.

The party primarily responsible for paying RETT is the transferor — the person making the disposal. This is the seller in a standard sale, the donor in a gift transaction, the distributing entity in a corporate restructuring. The obligation to pay sits with the person giving up the real estate.

The transferee (buyer or recipient) is not primarily liable — but can become jointly and severally liable if ZATCA determines the transferee was causally involved in the failure to pay. This matters in deals where the parties contractually agree that the buyer will bear RETT: that arrangement is valid between them, but it does not transfer the legal obligation to ZATCA.

RETT applies regardless of:

• The form of the transaction — sale, gift, barter, judicial order, inheritance distribution, or corporate transfer
• Whether the real estate is completed, under construction, or off-plan
• Whether the transaction is notarized or not
• Whether the real estate is residential, commercial, industrial, or undeveloped land
• Whether the transferor is a business or an individual

RETT is charged at 5% of the total value of the real estate transaction (Article 2(a) of the Implementing Regulations). That value is the consideration agreed between the parties, subject to a floor of the fair market value (FMV) at the date of the transaction.

If the agreed price is at or above FMV, the agreed price is the RETT base. If the agreed price is below FMV — or if there is no cash consideration (as in a gift) — ZATCA will assess the transaction at FMV. The concept of FMV for this purpose means the value that would be agreed between unrelated independent parties in ordinary business conditions, having regard to the nature of the transaction and the actual ownership transfer date.

The rate is flat. There is no progressive structure, no minimum de minimis threshold, and no distinction between residential and commercial property. Whether the transaction is SAR 500,000 or SAR 500 million, the rate is 5%.

One practical point worth noting: RETT is a transaction cost, not a capital gains tax. The SAR 140,000 is due whether Khalid made a profit on the sale or sold at a loss. The RETT obligation arises from the transfer event itself.

This is where many participants in Saudi real estate transactions go wrong. RETT and VAT are mutually exclusive on real estate transfers. A transaction that is subject to RETT is exempt from VAT. A transaction that falls outside the RETT scope — or is exempt from RETT — may attract VAT instead.

The key practical distinctions:

The most important rule is this: RETT applies to the disposal of real estate ownership. VAT applies to real estate services (leasing, construction, property management). When someone transfers ownership — regardless of whether it’s residential, commercial, or industrial — that is a RETT event, not a VAT event.

Developers in particular need to understand this boundary carefully. When a developer sells completed units to buyers, RETT applies to each sale. The developer’s construction costs, however, will include VAT charged by contractors — input VAT that the developer cannot recover against the RETT-exempt sale proceeds. This is a real cost issue that affects project economics.

The April 2025 Law replaced the original 2020 regime (which operated under Ministerial Resolution No. 712 of 15 Safar 1442H). The new Law and Implementing Regulations introduced several material changes:

• Expanded exemptions list: The new Law contains a significantly more detailed set of exemptions — including new provisions for off-plan developer acquisitions, endowment-owned entities, 90-day rescission of notarized transactions, and temporary guarantee arrangements under licensed financing.
• Clearer rules on Real Estate Companies: The new Regulations codify the look-through rule for transfers of interests in real estate-holding entities, with specific thresholds (50% asset test for company classification, 30% interest transfer threshold for triggering RETT) and a three-year aggregation window.
• Detailed due date rules: Article 4 of the Regulations specifies the RETT due date for each category of non-standard transaction — BOOT projects, usufruct rights, share transfers, off-plan sales — which the original regime handled less precisely.
• Expanded ZATCA enforcement powers: The new Law and Regulations strengthen ZATCA’s audit and assessment powers, including a three-year look-back window for assessments and broader provisions on deceptive transactions.
• Voluntary Disclosure mechanism: A formal voluntary disclosure framework is referenced, providing a pathway for taxpayers to correct past non-compliance with reduced penalty exposure.

RETT in Saudi Arabia is administered entirely through ZATCA’s electronic portal at zatca.gov.sa. There is no paper filing system. Every real estate transaction — whether taxable or exempt — must be registered through the portal by the transferor (or their representative) before the transaction can be completed.

The registration process captures:

• Details of the transferor and transferee (identity information)
• The deed or contract reference number
• Description and details of the real estate at the time of disposal
• Whether the transaction is taxable or exempt (and the applicable exemption basis, if exempt)
• The agreed transaction value

For taxable transactions, the portal generates a RETT payment invoice at 5% of the declared value. That invoice must be paid — via the bank account specified by ZATCA, using the unique transaction reference number — before the Notary Public or Accredited Notary will complete the title transfer. The notary will not proceed without confirmation of payment.

For exempt transactions, ZATCA issues a confirmation notice. That notice is the evidence of exemption registration and must be retained in the transferor’s records for at least five years from the transaction date (Article 11(f)(3) of the Regulations).

The transferor bears full responsibility for the accuracy of the registration. The act of registration constitutes an acknowledgment of the information provided.