RETT on the Sale of Real Estate in Saudi Arabia: The Standard Case

A standard real estate sale — one party transfers ownership of Saudi property to another in exchange for a cash price — is the paradigm RETT transaction. The tax is 5% of the total value of the transaction, assessed on the agreed price provided it reflects fair market value.

The mechanics are deliberately simple: the assignor (seller) accesses ZATCA’s electronic portal at zatca.gov.sa, enters the transaction details, and the system generates a payment invoice for 5% of the declared value. That invoice must be paid before the Notary Public or Accredited Notary will complete the ownership transfer — the Ministry of Justice systems are electronically linked to ZATCA’s RETT portal, making payment a hard prerequisite to notarization.

The seller bears the RETT liability. The buyer may agree contractually to pay RETT on the seller’s behalf — and in practice this is negotiated — but the legal obligation sits with the assignor (seller) under Article 7 of the Implementing Regulations. If ZATCA later reassesses the transaction and finds additional tax is due, it is the seller who is primarily pursued, not the buyer (unless the buyer was party to a value-understatement arrangement).

RETT is assessed on the agreed price, provided that price is within the limits of the fair market value. This qualifier matters. If ZATCA determines that the agreed price understates the fair market value of the property, it may assess RETT on the fair market value instead.

Article 8 of the Implementing Regulations identifies specific scenarios where ZATCA may verify the declared value. These include: transactions between related persons (as defined by Article 64 of the Income Tax Law and the Transfer Pricing Bylaws), transactions where the consideration is split between the real estate and other assets, non-cash consideration structures, and cases involving an unknown or unspecified value. ZATCA also has the right to challenge where it “suspects manipulation of the value of a real estate transaction deliberately for any purpose.”

In cases where ZATCA challenges the value, the assignor or assignee may submit an assessment from an accredited valuator. If ZATCA still finds the value below fair market value, it will assess using approved real estate market indices or its own accredited valuator. A reassessment demand can be issued within three years from the date of disclosure of the transaction.

A common question in practice: if a seller agrees to receive the purchase price in installments over several years, does RETT arise on each installment, or all at once?

The answer is clear under the RETT framework: RETT arises on the date of the taxable event — the transfer of the right — not on the date of each payment. The fact that the consideration is paid in installments does not defer or fragment the tax obligation. If ownership (or possession for the purpose of ownership) transfers on a specific date, RETT is due on that date, on the full value of the transaction.

For notarized sales, the tax must be paid before or on the date of notarization. The seller cannot pay RETT on a “received so far” basis. The full 5% is assessed on the total agreed consideration at the point of the transaction, and the entire RETT amount is due upfront.

This has a practical cash flow implication for sellers receiving consideration over time: the RETT liability arises and must be paid at the point of transfer, even if the full price has not yet been received. Sellers structuring deferred-payment sales need to factor this into their liquidity planning.

For a standard notarized sale, the process is as follows:

1. Seller logs into ZATCA’s portal (zatca.gov.sa) and selects the Real Estate Transaction Tax service.
2. Transaction details are entered: deed number, contract data, nature of the transfer, whether an exemption is claimed, and the declared transaction value.
3. ZATCA’s system calculates the RETT amount and issues a payment invoice at 5% of the declared value.
4. Payment is made to the bank account specified by ZATCA, referencing the transaction number. The buyer may make this payment on the seller’s behalf — but the legal liability remains with the seller.
5. Proof of payment is presented to the Notary Public or Accredited Notary. The notarization system is electronically linked to ZATCA — the notarization cannot proceed until ZATCA’s records confirm payment has been received.
6. The Notary completes the transfer and notifies the seller of completion.

Not all real estate transfers in Saudi Arabia are notarized at the time of the underlying agreement. RETT applies to these transactions too. The Implementing Regulations address this specifically: where possession of the real estate transfers to the buyer for the purpose of ownership without formal notarization, the tax due date is the date on which the property is placed in the possession of the transferee.

In these cases, payment must be made within 30 calendar days of the disposal date. The disposal date can be established by any evidence available to ZATCA — including unofficial documents, circumstantial evidence, and market information. Waiting for notarization before paying RETT on a non-notarized transfer is a non-compliance risk.

ZATCA may accelerate the payment demand to 30 days from the date of disposal where it is proven that delayed payment was the main purpose of the delay (Article 5(D) of the Implementing Regulations). This anti-avoidance provision is intended to address deliberate deferral tactics.

RETT already paid can be refunded in certain circumstances under Article 9 of the Implementing Regulations.

• Tax paid in excess or by mistake: A refund application may be submitted, including where tax was paid but it subsequently emerged the transaction was exempt.
• Incomplete transaction: If the real estate transaction does not complete after RETT has been paid, the seller can apply for a refund — but must first return any consideration already received from the buyer, and must notify ZATCA in accordance with the correction procedures.
• Mutual consent cancellation within 90 days: Where both parties cancel a notarized real estate transaction by mutual consent, and the cancellation is notarized with the Notary Public within 90 days of the original notarization, with the full value returned to the buyer and the real estate description unchanged, RETT is refundable.

Refund requests must be submitted within 12 months from the payment due date, or within 60 days from the date of a final court decision or ZATCA settlement decision relating to the transaction. ZATCA must issue its decision on a refund request within 30 days, and if approved, must process the refund within a further 30 days.