RETT on Off-Plan Property Sales in Saudi Arabia

Off-plan sales are a distinct RETT category with one critically different rule from all other real estate transactions: RETT is due on the date of notarization of the ownership transfer with the Notary Public or Accredited Notary — not on the date the original off-plan purchase agreement (SPA) is signed between developer and buyer.

In a standard notarized sale, the tax due date and the notarization date are the same event. For off-plan sales, the signing of the SPA and the notarization of actual ownership transfer are separated by the construction period — often two to five years. RETT does not arise when the SPA is executed. It arises later, when the completed property is formally transferred to the buyer at the Notary Public.

This is confirmed by Article 4(e) and Article 5(C) of the Implementing Regulations: for off-plan sales, the tax due date is the date of notarization of ownership transfer, and payment must be made on or before that notarization date.

For a licensed real estate developer making off-plan sales, RETT is a transaction cost on each unit sold. The developer (as assignor/seller) is responsible for RETT and must pay it before or on the date of notarization with the Notary Public — the point at which each buyer’s unit is formally registered in their name.

For a developer selling 200 units in a project, this means 200 separate RETT payments, each due at the notarization date of the respective unit. RETT does not arise in bulk at project launch or when marketing starts. It arises unit by unit as each ownership transfer is notarized on completion.

From an accounting and tax perspective, RETT incurred on off-plan unit sales is a cost of sales for the developer. It is deductible against revenue for Corporate Income Tax (CIT) or Zakat purposes in the year the RETT is incurred, in line with standard cost of sales treatment under the applicable accounting standards. However, RETT is not a recoverable input cost — it cannot be offset against VAT or reclaimed. It is a final cost.

Article 3(19) of the Implementing Regulations contains a specific exemption that supports the off-plan development cycle: a disposal of real estate by any person to a licensed real estate developer for the purpose of an off-plan project is exempt from RETT — subject to conditions.

The conditions: the developer must hold an off-plan sales and rental licence at or before the transaction date; the land must be designated for a licensed off-plan project (with a licensing decision issued, or to be issued within 90 days); and the developer must not be selling the land on — it must be used for the off-plan project.

If the licensing decision has not been issued by the transaction date, the seller has 90 days to provide it to ZATCA — but must either pay RETT or provide a bank guarantee equivalent to the RETT amount upfront. If the licence is issued within the 90-day period, the guarantee is released or RETT refunded. If not, ZATCA retains the guarantee or RETT payment.

A buyer who purchases an off-plan unit and then re-sells their contractual rights to another buyer before completion — a practice known as assignment of the off-plan contract — creates a separate RETT question. The buyer at SPA stage does not yet have title; they have a contractual right to acquire the property when complete.

The RETT treatment of an assignment of off-plan rights is an area where careful analysis is required. The RETT Law taxes transactions resulting in the transfer of real estate ownership or possession for ownership purposes. An assignment of contractual rights to an off-plan unit arguably transfers the right to acquire ownership — which could be characterised as a transfer of the right to the benefit of the real estate. ZATCA’s approach to this specific scenario should be confirmed through its portal or a ruling request for significant transactions.

Once the original buyer ultimately takes title at notarization, the RETT due date rules for off-plan sales apply: RETT is due at notarization. The intermediate assignment may or may not have separately triggered RETT depending on ZATCA’s characterisation. Advisors structuring assignment transactions in high-value off-plan developments should obtain clarity before proceeding.