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.also-card:hover{border-color:var(--green);box-shadow:0 2px 8px rgba(5,150,105,0.08)}.dariba-article .also-card .also-label{font-size:0.68rem;font-weight:700;text-transform:uppercase;color:var(--green);letter-spacing:0.08em;margin-bottom:0.35rem}.dariba-article .also-card .also-title{font-size:0.875rem;font-weight:600;line-height:1.4}.dariba-article .disclaimer{font-size:0.78rem;color:var(--text-muted);border-top:1px solid var(--border);padding-top:1rem;margin-top:2.5rem;font-style:italic;line-height:1.6}<\/style>\n<\/head>\n<body>\n<div class=\"dariba-article\">\n<div class=\"article-meta\"><span class=\"tag\">RETT<\/span><span>Taxable Events<\/span><\/div>\n\n<div class=\"series-banner\">Part of <a href=\"https:\/\/www.dariba.co\/rett-saudi-arabia\/\">RETT in Saudi Arabia: The Complete Guide<\/a> \u2014 Cluster 2: Taxable Events \u00b7 Article 2.8<\/div>\n\n<div class=\"section-block\">\n <div class=\"section-number\"><span class=\"section-num-badge\">01<\/span><h2>The Default Rule: Every Transfer to a New Entity Is a Taxable Event<\/h2><\/div>\n <p>When real estate moves from one legal person to another \u2014 regardless of the reason \u2014 a real estate transaction has occurred under the RETT Law. Contributing land or a building to a company in exchange for shares is a disposal of real estate. The fact that you receive equity rather than cash does not change the legal effect: ownership has transferred from an individual or entity to a new legal entity, and RETT is assessed on the fair market value of the real estate contributed.<\/p>\n <p>This catches many business owners off guard. The instinct when “keeping it in the family” \u2014 by contributing property to a JV, a subsidiary, or a newly incorporated LLC \u2014 is that no “sale” has occurred. Under the RETT Law, that instinct is wrong. The RETT Law is indifferent to the form of the consideration. In-kind consideration (shares) is still consideration, and the transfer is taxable.<\/p>\n <p>The financial exposure is not trivial. A SAR 20 million land contribution to a joint venture company generates a RETT liability of SAR 1,000,000. A SAR 50 million building contribution triggers SAR 2,500,000. Project developers and family business groups restructuring their real estate portfolios must cost this in from day one.<\/p>\n<\/div>\n\n<div class=\"section-block\">\n <div class=\"section-number\"><span class=\"section-num-badge\">02<\/span><h2>The Available Exemptions for Restructuring Transactions<\/h2><\/div>\n <p>The RETT Implementing Regulations (Article 3) contain specific exemptions that can protect qualifying restructuring transactions from RETT. These are not automatic \u2014 each exemption has precise conditions, all of which must be met at the time of the transfer and maintained for a five-year lock-up period thereafter.<\/p>\n\n <h3>Exemption 1: Individual to Sole-Ownership Company (Article 3(17))<\/h3>\n <p>A natural person transferring real estate to a company or investment fund that the person alone owns 100% of (directly or indirectly) is exempt from RETT \u2014 provided the person’s ownership percentage in that company does not change for at least five years from the date of disposal.<\/p>\n <p>This covers: a sole trader incorporating an LLC and contributing their property portfolio into it; an individual converting their real estate into a wholly-owned holding company. The five-year lock-up means the individual cannot sell down, admit new shareholders, or dilute their interest within five years without triggering retroactive RETT from the original contribution date.<\/p>\n\n <h3>Exemption 2: Intra-Group Transfers Between 100%-Owned Entities (Article 3(18))<\/h3>\n <p>Real estate disposals between companies where one owns 100% of the other (directly or indirectly), between a company and a wholly-owned fund, or between entities whose shares are all owned by the same persons (directly or indirectly) are exempt \u2014 provided that all shares of the transferee entity remain owned by the same persons for at least five years.<\/p>\n <p>This covers: a parent company transferring a building to a wholly-owned subsidiary; two sister companies (both 100% owned by the same holding company) exchanging properties; an entity transferring real estate to a fund it wholly owns.<\/p>\n\n <h3>Exemption 3: In-Kind Capital Contribution to a Company (Article 3(11))<\/h3>\n <p>A real estate transaction providing an in-kind share to the capital of a company established in Saudi Arabia is exempt, provided: (a) the shares corresponding to the in-kind contribution are not disposed of for at least five years from the date of ownership, and (b) the company maintains audited financial statements from an accredited external auditor throughout that period.<\/p>\n <p>This is broader \u2014 it covers contributions to any Saudi company (not just wholly-owned ones). The conditions are: five-year share lock-up and audited financials throughout. Note that this exemption covers the contributor’s shares, not ownership of the company generally.<\/p>\n\n <div class=\"callout callout-warning\">\n <div class=\"callout-label\">The Five-Year Trap \u2014 Retroactive RETT<\/div>\n <p>All three restructuring exemptions share a critical feature: if the lock-up condition is violated within five years \u2014 by selling shares, admitting new shareholders (in certain structures), or otherwise breaking the ownership continuity condition \u2014 RETT becomes due retroactively from the original transfer date. The RETT amount plus late-payment fines accruing from the original date can easily dwarf the original tax that would have been paid. Build five-year horizon analysis into any restructuring that uses these exemptions.<\/p>\n <\/div>\n<\/div>\n\n<div class=\"section-block\">\n <div class=\"section-number\"><span class=\"section-num-badge\">03<\/span><h2>Common Restructuring Scenarios<\/h2><\/div>\n\n <div class=\"table-wrap\">\n <table>\n <thead><tr><th>Scenario<\/th><th>Default Position<\/th><th>Potential Exemption<\/th><th>Key Condition<\/th><\/tr><\/thead>\n <tbody>\n <tr><td>Sole trader incorporates LLC and contributes land<\/td><td>Taxable \u2014 ownership moves to new entity<\/td><td>Art 3(17) or Art 3(11)<\/td><td>100% ownership maintained for 5 years<\/td><\/tr>\n <tr><td>Parent transfers building to wholly-owned subsidiary<\/td><td>Taxable \u2014 inter-entity transfer<\/td><td>Art 3(18)<\/td><td>100% ownership chain maintained for 5 years<\/td><\/tr>\n <tr><td>Individual contributes land to a JV company (50% stake)<\/td><td>Taxable \u2014 partial ownership change<\/td><td>Art 3(11)<\/td><td>Contributor’s shares held for 5 years; audited accounts maintained<\/td><\/tr>\n <tr><td>Two unrelated companies merge by legal merger<\/td><td>Taxable \u2014 ownership transfers<\/td><td>Art 3(16)(a) \u2014 merger exemption<\/td><td>Share-only consideration; pro-rata shares; 5-year lock-up<\/td><\/tr>\n <tr><td>Company A acquires 100% of Company B via share swap<\/td><td>Taxable real estate transaction<\/td><td>Art 3(16)(b) \u2014 acquisition exemption<\/td><td>Share-only consideration; single transaction; 5-year lock-up<\/td><\/tr>\n <tr><td>Individual transfers land to cousin’s company<\/td><td>Taxable \u2014 no qualifying relationship<\/td><td>None available<\/td><td>\u2014<\/td><\/tr>\n <\/tbody>\n <\/table>\n <\/div>\n<\/div>\n\n<div class=\"section-block\">\n <div class=\"section-number\"><span class=\"section-num-badge\">04<\/span><h2>Worked Example \u2014 JV Contribution<\/h2><\/div>\n <div class=\"callout\">\n <div class=\"callout-label\">Case Study \u2014 Land Contribution to a Joint Venture<\/div>\n <h4>Scenario<\/h4>\n <p>Nasser Al-Harbi owns a plot of land in Riyadh with a fair market value of SAR 30,000,000. He is forming a joint venture with a Saudi developer (Al-Naseem Development) to build a residential complex. The JV will be structured as an LLC with Nasser contributing the land (valued at SAR 30M for his 50% equity stake) and Al-Naseem contributing SAR 30M in cash for the other 50%.<\/p>\n <h4>Default RETT Position<\/h4>\n <p>Nasser’s contribution is a taxable disposal of real estate. RETT = SAR 30,000,000 \u00d7 5% = <strong>SAR 1,500,000<\/strong>. This must be paid before or at the time of notarizing the contribution.<\/p>\n <h4>Exemption Analysis<\/h4>\n <p>Article 3(11) potentially applies: Nasser is providing an in-kind contribution to the capital of a Saudi company. Conditions: Nasser must hold his 50% JV shares for five years from the contribution date, and the JV LLC must maintain audited financial statements from an accredited auditor throughout. If both conditions are met at the time of contribution \u2014 and continue to be met \u2014 the contribution is exempt. If Nasser sells his shares in year 3, retroactive RETT of SAR 1,500,000 plus fines becomes due.<\/p>\n <\/div>\n<\/div>\n\n<div class=\"section-block\">\n <div class=\"section-number\"><span class=\"section-num-badge\">05<\/span><h2>Frequently Asked Questions<\/h2><\/div>\n <div class=\"faq-list\">\n <div class=\"faq-item\">\n <button class=\"faq-q\">We are converting a sole establishment to an LLC and transferring all assets including real estate. Is RETT due?<span class=\"faq-icon\">+<\/span><\/button>\n <div class=\"faq-a\">The conversion itself is a legal change of form \u2014 whether it is treated as a transfer for RETT purposes depends on whether a new legal entity is created and whether real estate ownership moves to that new entity. If the LLC is a new legal person receiving the real estate, it is a taxable event by default. The Article 3(17) exemption may apply if the individual alone owns 100% of the LLC and maintains that for five years. Confirm the structure with a Saudi legal advisor before proceeding.<\/div>\n <\/div>\n <div class=\"faq-item\">\n <button class=\"faq-q\">Our parent company owns 80% of a subsidiary (not 100%). Can we still use the intra-group exemption?<span class=\"faq-icon\">+<\/span><\/button>\n <div class=\"faq-a\">No \u2014 Article 3(18) requires 100% direct or indirect ownership. An 80% subsidiary does not qualify for this exemption. Article 3(11) (in-kind contribution) may still be available if the parent is contributing to the subsidiary’s capital, but the conditions differ. The fact that 20% is held by others means the 100%-ownership exemption cannot apply. Structure the transaction carefully and consider whether the contribution can be done at a time when 100% ownership is achieved.<\/div>\n <\/div>\n <div class=\"faq-item\">\n <button class=\"faq-q\">We sold shares in the company that received the real estate contribution in year 4 (before the 5-year period ended). What happens?<span class=\"faq-icon\">+<\/span><\/button>\n <div class=\"faq-a\">The exemption condition is violated. RETT becomes due retroactively from the date of the original real estate contribution, with late-payment fines accruing from that date at 2% per month (capped at 50% of the unpaid tax). You must notify ZATCA and pay within 30 days of the breach. The quantum of late-payment fines can be substantial \u2014 four years of 2% monthly adds up significantly.<\/div>\n <\/div>\n <\/div>\n<\/div>\n\n<div class=\"takeaways\">\n <div class=\"takeaways-title\">◆ Key Takeaways<\/div>\n <ol>\n <li>Every transfer of real estate to a new legal entity \u2014 including capital contributions in exchange for shares \u2014 is a taxable RETT event by default.<\/li>\n <li>Three main exemption pathways exist for restructuring: sole-owner contributions (Art 3(17)), 100% intra-group transfers (Art 3(18)), and in-kind capital contributions to Saudi companies (Art 3(11)).<\/li>\n <li>All exemptions require a five-year post-transfer share lock-up. Violation triggers retroactive RETT from the original contribution date plus late-payment fines.<\/li>\n <li>A SAR 20M land contribution = SAR 1M RETT if no exemption applies. Build this into feasibility models from day one.<\/li>\n <li>JV contributions by a contributing party who retains their shares for five years, in a company with audited accounts, may qualify under Article 3(11) \u2014 even where 100% ownership is not maintained.<\/li>\n <\/ol>\n<\/div>\n\n<div class=\"series-footer\"><p>RETT in Saudi Arabia \u2014 Cluster 2: Taxable Events<\/p><h4>Continue with the full RETT knowledge library on dariba.co<\/h4><a href=\"https:\/\/www.dariba.co\/rett-saudi-arabia\/\" class=\"btn-primary\">View all RETT articles \u2192<\/a><\/div>\n\n<div class=\"also-reading\"><h4>Related Articles<\/h4><div class=\"also-cards\">\n <a href=\"https:\/\/www.dariba.co\/rett-exemptions-restructuring\/\" class=\"also-card\"><div class=\"also-label\">RETT<\/div><div class=\"also-title\">RETT Restructuring Exemptions: Mergers, Acquisitions and Intra-Group Transfers<\/div><\/a>\n <a href=\"https:\/\/www.dariba.co\/what-triggers-rett\/\" class=\"also-card\"><div class=\"also-label\">RETT<\/div><div class=\"also-title\">What Transactions Trigger RETT? The Complete Guide<\/div><\/a>\n<\/div><\/div>\n\n<p class=\"disclaimer\">Grounded in the RETT Law (Royal Decree No. M\/84, effective 10 April 2025), Implementing Regulations (ZATCA Board Resolution No. 01-03-25, 24 March 2025), and ZATCA’s Detailed Guideline Version 6 (May 2026). For informational purposes only. dariba.co is an independent knowledge platform.<\/p>\n<\/div>\n<script>document.querySelectorAll('.dariba-article .faq-q').forEach(function(btn){btn.addEventListener('click',function(){btn.parentElement.classList.toggle('open');});});<\/script>\n<\/body>\n<\/html>\n\n","protected":false},"excerpt":{"rendered":"<p>RETT on Capital Contributions and Corporate Restructuring in Saudi Arabia | Dariba.co RETTTaxable Events Part of RETT in Saudi Arabia: The Complete Guide \u2014 Cluster 2: Taxable Events \u00b7 Article 2.8 01 The Default Rule: Every Transfer to a New Entity Is a Taxable Event When real estate moves from one legal person to another […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[],"class_list":["post-519","post","type-post","status-publish","format-standard","hentry","category-rett"],"_links":{"self":[{"href":"https:\/\/www.dariba.co\/index.php?rest_route=\/wp\/v2\/posts\/519","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.dariba.co\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.dariba.co\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.dariba.co\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.dariba.co\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=519"}],"version-history":[{"count":0,"href":"https:\/\/www.dariba.co\/index.php?rest_route=\/wp\/v2\/posts\/519\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.dariba.co\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=519"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.dariba.co\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=519"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.dariba.co\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=519"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}

{"id":519,"date":"2026-06-06T10:13:22","date_gmt":"2026-06-06T10:13:22","guid":{"rendered":"https:\/\/www.dariba.co\/?p=519"},"modified":"2026-06-06T10:13:22","modified_gmt":"2026-06-06T10:13:22","slug":"rett-on-capital-contributions-and-corporate-restructuring","status":"publish","type":"post","link":"https:\/\/www.dariba.co\/?p=519","title":{"rendered":"RETT on Capital Contributions and Corporate Restructuring in Saudi Arabia"},"content":{"rendered":"\n\n\n\n\n\nRETT on Capital Contributions and Corporate Restructuring in Saudi Arabia | Dariba.co<\/title>\n<meta name=\"description\" content=\"How RETT applies when real estate is contributed to a company or transferred in a corporate restructuring in Saudi Arabia \u2014 the default taxable event, available exemptions, and compliance risks.\">\n<link rel=\"preconnect\" href=\"https:\/\/fonts.googleapis.com\">\n<link href=\"https:\/\/fonts.googleapis.com\/css2?family=DM+Sans:wght@400;500;600;700;800&display=swap\" 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.takeaways ol{padding-left:1.4rem;margin:0}.dariba-article .takeaways ol li{margin-bottom:0.6rem;font-size:0.9rem;line-height:1.65}.dariba-article .series-footer{background:var(--surface);border:1px solid var(--border);border-radius:var(--radius-lg);padding:1.5rem;margin:3rem 0 1.5rem;text-align:center}.dariba-article .series-footer p{font-size:0.8rem;color:var(--text-muted);margin-bottom:0.4rem}.dariba-article .series-footer h4{font-size:1rem;margin-bottom:1rem}.dariba-article .btn-primary{display:inline-block;background:var(--green);color:#fff;font-weight:700;font-size:0.875rem;padding:0.65rem 1.5rem;border-radius:var(--radius);text-decoration:none}.dariba-article .btn-primary:hover{opacity:0.88;color:#fff}.dariba-article .also-reading{margin:2rem 0}.dariba-article .also-reading h4{font-size:0.72rem;font-weight:700;text-transform:uppercase;letter-spacing:0.08em;color:var(--text-muted);margin-bottom:1rem}.dariba-article .also-cards{display:grid;grid-template-columns:1fr 1fr;gap:0.875rem}@media(max-width:600px){.dariba-article .also-cards{grid-template-columns:1fr}}.dariba-article .also-card{background:var(--surface);border:1px solid var(--border);border-radius:var(--radius);padding:1rem;text-decoration:none;display:block}.dariba-article .also-card:hover{border-color:var(--green);box-shadow:0 2px 8px rgba(5,150,105,0.08)}.dariba-article .also-card .also-label{font-size:0.68rem;font-weight:700;text-transform:uppercase;color:var(--green);letter-spacing:0.08em;margin-bottom:0.35rem}.dariba-article .also-card .also-title{font-size:0.875rem;font-weight:600;line-height:1.4}.dariba-article .disclaimer{font-size:0.78rem;color:var(--text-muted);border-top:1px solid var(--border);padding-top:1rem;margin-top:2.5rem;font-style:italic;line-height:1.6}<\/style>\n<\/head>\n<body>\n<div class=\"dariba-article\">\n<div class=\"article-meta\"><span class=\"tag\">RETT<\/span><span>Taxable Events<\/span><\/div>\n\n<div class=\"series-banner\">Part of <a href=\"https:\/\/www.dariba.co\/rett-saudi-arabia\/\">RETT in Saudi Arabia: The Complete Guide<\/a> \u2014 Cluster 2: Taxable Events \u00b7 Article 2.8<\/div>\n\n<div class=\"section-block\">\n <div class=\"section-number\"><span class=\"section-num-badge\">01<\/span><h2>The Default Rule: Every Transfer to a New Entity Is a Taxable Event<\/h2><\/div>\n <p>When real estate moves from one legal person to another \u2014 regardless of the reason \u2014 a real estate transaction has occurred under the RETT Law. Contributing land or a building to a company in exchange for shares is a disposal of real estate. The fact that you receive equity rather than cash does not change the legal effect: ownership has transferred from an individual or entity to a new legal entity, and RETT is assessed on the fair market value of the real estate contributed.<\/p>\n <p>This catches many business owners off guard. The instinct when “keeping it in the family” \u2014 by contributing property to a JV, a subsidiary, or a newly incorporated LLC \u2014 is that no “sale” has occurred. Under the RETT Law, that instinct is wrong. The RETT Law is indifferent to the form of the consideration. In-kind consideration (shares) is still consideration, and the transfer is taxable.<\/p>\n <p>The financial exposure is not trivial. A SAR 20 million land contribution to a joint venture company generates a RETT liability of SAR 1,000,000. A SAR 50 million building contribution triggers SAR 2,500,000. Project developers and family business groups restructuring their real estate portfolios must cost this in from day one.<\/p>\n<\/div>\n\n<div class=\"section-block\">\n <div class=\"section-number\"><span class=\"section-num-badge\">02<\/span><h2>The Available Exemptions for Restructuring Transactions<\/h2><\/div>\n <p>The RETT Implementing Regulations (Article 3) contain specific exemptions that can protect qualifying restructuring transactions from RETT. These are not automatic \u2014 each exemption has precise conditions, all of which must be met at the time of the transfer and maintained for a five-year lock-up period thereafter.<\/p>\n\n <h3>Exemption 1: Individual to Sole-Ownership Company (Article 3(17))<\/h3>\n <p>A natural person transferring real estate to a company or investment fund that the person alone owns 100% of (directly or indirectly) is exempt from RETT \u2014 provided the person’s ownership percentage in that company does not change for at least five years from the date of disposal.<\/p>\n <p>This covers: a sole trader incorporating an LLC and contributing their property portfolio into it; an individual converting their real estate into a wholly-owned holding company. The five-year lock-up means the individual cannot sell down, admit new shareholders, or dilute their interest within five years without triggering retroactive RETT from the original contribution date.<\/p>\n\n <h3>Exemption 2: Intra-Group Transfers Between 100%-Owned Entities (Article 3(18))<\/h3>\n <p>Real estate disposals between companies where one owns 100% of the other (directly or indirectly), between a company and a wholly-owned fund, or between entities whose shares are all owned by the same persons (directly or indirectly) are exempt \u2014 provided that all shares of the transferee entity remain owned by the same persons for at least five years.<\/p>\n <p>This covers: a parent company transferring a building to a wholly-owned subsidiary; two sister companies (both 100% owned by the same holding company) exchanging properties; an entity transferring real estate to a fund it wholly owns.<\/p>\n\n <h3>Exemption 3: In-Kind Capital Contribution to a Company (Article 3(11))<\/h3>\n <p>A real estate transaction providing an in-kind share to the capital of a company established in Saudi Arabia is exempt, provided: (a) the shares corresponding to the in-kind contribution are not disposed of for at least five years from the date of ownership, and (b) the company maintains audited financial statements from an accredited external auditor throughout that period.<\/p>\n <p>This is broader \u2014 it covers contributions to any Saudi company (not just wholly-owned ones). The conditions are: five-year share lock-up and audited financials throughout. Note that this exemption covers the contributor’s shares, not ownership of the company generally.<\/p>\n\n <div class=\"callout callout-warning\">\n <div class=\"callout-label\">The Five-Year Trap \u2014 Retroactive RETT<\/div>\n <p>All three restructuring exemptions share a critical feature: if the lock-up condition is violated within five years \u2014 by selling shares, admitting new shareholders (in certain structures), or otherwise breaking the ownership continuity condition \u2014 RETT becomes due retroactively from the original transfer date. The RETT amount plus late-payment fines accruing from the original date can easily dwarf the original tax that would have been paid. Build five-year horizon analysis into any restructuring that uses these exemptions.<\/p>\n <\/div>\n<\/div>\n\n<div class=\"section-block\">\n <div class=\"section-number\"><span class=\"section-num-badge\">03<\/span><h2>Common Restructuring Scenarios<\/h2><\/div>\n\n <div class=\"table-wrap\">\n <table>\n <thead><tr><th>Scenario<\/th><th>Default Position<\/th><th>Potential Exemption<\/th><th>Key Condition<\/th><\/tr><\/thead>\n <tbody>\n <tr><td>Sole trader incorporates LLC and contributes land<\/td><td>Taxable \u2014 ownership moves to new entity<\/td><td>Art 3(17) or Art 3(11)<\/td><td>100% ownership maintained for 5 years<\/td><\/tr>\n <tr><td>Parent transfers building to wholly-owned subsidiary<\/td><td>Taxable \u2014 inter-entity transfer<\/td><td>Art 3(18)<\/td><td>100% ownership chain maintained for 5 years<\/td><\/tr>\n <tr><td>Individual contributes land to a JV company (50% stake)<\/td><td>Taxable \u2014 partial ownership change<\/td><td>Art 3(11)<\/td><td>Contributor’s shares held for 5 years; audited accounts maintained<\/td><\/tr>\n <tr><td>Two unrelated companies merge by legal merger<\/td><td>Taxable \u2014 ownership transfers<\/td><td>Art 3(16)(a) \u2014 merger exemption<\/td><td>Share-only consideration; pro-rata shares; 5-year lock-up<\/td><\/tr>\n <tr><td>Company A acquires 100% of Company B via share swap<\/td><td>Taxable real estate transaction<\/td><td>Art 3(16)(b) \u2014 acquisition exemption<\/td><td>Share-only consideration; single transaction; 5-year lock-up<\/td><\/tr>\n <tr><td>Individual transfers land to cousin’s company<\/td><td>Taxable \u2014 no qualifying relationship<\/td><td>None available<\/td><td>\u2014<\/td><\/tr>\n <\/tbody>\n <\/table>\n <\/div>\n<\/div>\n\n<div class=\"section-block\">\n <div class=\"section-number\"><span class=\"section-num-badge\">04<\/span><h2>Worked Example \u2014 JV Contribution<\/h2><\/div>\n <div class=\"callout\">\n <div class=\"callout-label\">Case Study \u2014 Land Contribution to a Joint Venture<\/div>\n <h4>Scenario<\/h4>\n <p>Nasser Al-Harbi owns a plot of land in Riyadh with a fair market value of SAR 30,000,000. He is forming a joint venture with a Saudi developer (Al-Naseem Development) to build a residential complex. The JV will be structured as an LLC with Nasser contributing the land (valued at SAR 30M for his 50% equity stake) and Al-Naseem contributing SAR 30M in cash for the other 50%.<\/p>\n <h4>Default RETT Position<\/h4>\n <p>Nasser’s contribution is a taxable disposal of real estate. RETT = SAR 30,000,000 \u00d7 5% = <strong>SAR 1,500,000<\/strong>. This must be paid before or at the time of notarizing the contribution.<\/p>\n <h4>Exemption Analysis<\/h4>\n <p>Article 3(11) potentially applies: Nasser is providing an in-kind contribution to the capital of a Saudi company. Conditions: Nasser must hold his 50% JV shares for five years from the contribution date, and the JV LLC must maintain audited financial statements from an accredited auditor throughout. If both conditions are met at the time of contribution \u2014 and continue to be met \u2014 the contribution is exempt. If Nasser sells his shares in year 3, retroactive RETT of SAR 1,500,000 plus fines becomes due.<\/p>\n <\/div>\n<\/div>\n\n<div class=\"section-block\">\n <div class=\"section-number\"><span class=\"section-num-badge\">05<\/span><h2>Frequently Asked Questions<\/h2><\/div>\n <div class=\"faq-list\">\n <div class=\"faq-item\">\n <button class=\"faq-q\">We are converting a sole establishment to an LLC and transferring all assets including real estate. Is RETT due?<span class=\"faq-icon\">+<\/span><\/button>\n <div class=\"faq-a\">The conversion itself is a legal change of form \u2014 whether it is treated as a transfer for RETT purposes depends on whether a new legal entity is created and whether real estate ownership moves to that new entity. If the LLC is a new legal person receiving the real estate, it is a taxable event by default. The Article 3(17) exemption may apply if the individual alone owns 100% of the LLC and maintains that for five years. Confirm the structure with a Saudi legal advisor before proceeding.<\/div>\n <\/div>\n <div class=\"faq-item\">\n <button class=\"faq-q\">Our parent company owns 80% of a subsidiary (not 100%). Can we still use the intra-group exemption?<span class=\"faq-icon\">+<\/span><\/button>\n <div class=\"faq-a\">No \u2014 Article 3(18) requires 100% direct or indirect ownership. An 80% subsidiary does not qualify for this exemption. Article 3(11) (in-kind contribution) may still be available if the parent is contributing to the subsidiary’s capital, but the conditions differ. The fact that 20% is held by others means the 100%-ownership exemption cannot apply. Structure the transaction carefully and consider whether the contribution can be done at a time when 100% ownership is achieved.<\/div>\n <\/div>\n <div class=\"faq-item\">\n <button class=\"faq-q\">We sold shares in the company that received the real estate contribution in year 4 (before the 5-year period ended). What happens?<span class=\"faq-icon\">+<\/span><\/button>\n <div class=\"faq-a\">The exemption condition is violated. RETT becomes due retroactively from the date of the original real estate contribution, with late-payment fines accruing from that date at 2% per month (capped at 50% of the unpaid tax). You must notify ZATCA and pay within 30 days of the breach. The quantum of late-payment fines can be substantial \u2014 four years of 2% monthly adds up significantly.<\/div>\n <\/div>\n <\/div>\n<\/div>\n\n<div class=\"takeaways\">\n <div class=\"takeaways-title\">◆ Key Takeaways<\/div>\n <ol>\n <li>Every transfer of real estate to a new legal entity \u2014 including capital contributions in exchange for shares \u2014 is a taxable RETT event by default.<\/li>\n <li>Three main exemption pathways exist for restructuring: sole-owner contributions (Art 3(17)), 100% intra-group transfers (Art 3(18)), and in-kind capital contributions to Saudi companies (Art 3(11)).<\/li>\n <li>All exemptions require a five-year post-transfer share lock-up. Violation triggers retroactive RETT from the original contribution date plus late-payment fines.<\/li>\n <li>A SAR 20M land contribution = SAR 1M RETT if no exemption applies. Build this into feasibility models from day one.<\/li>\n <li>JV contributions by a contributing party who retains their shares for five years, in a company with audited accounts, may qualify under Article 3(11) \u2014 even where 100% ownership is not maintained.<\/li>\n <\/ol>\n<\/div>\n\n<div class=\"series-footer\"><p>RETT in Saudi Arabia \u2014 Cluster 2: Taxable Events<\/p><h4>Continue with the full RETT knowledge library on dariba.co<\/h4><a href=\"https:\/\/www.dariba.co\/rett-saudi-arabia\/\" class=\"btn-primary\">View all RETT articles \u2192<\/a><\/div>\n\n<div class=\"also-reading\"><h4>Related Articles<\/h4><div class=\"also-cards\">\n <a href=\"https:\/\/www.dariba.co\/rett-exemptions-restructuring\/\" class=\"also-card\"><div class=\"also-label\">RETT<\/div><div class=\"also-title\">RETT Restructuring Exemptions: Mergers, Acquisitions and Intra-Group Transfers<\/div><\/a>\n <a href=\"https:\/\/www.dariba.co\/what-triggers-rett\/\" class=\"also-card\"><div class=\"also-label\">RETT<\/div><div class=\"also-title\">What Transactions Trigger RETT? The Complete Guide<\/div><\/a>\n<\/div><\/div>\n\n<p class=\"disclaimer\">Grounded in the RETT Law (Royal Decree No. M\/84, effective 10 April 2025), Implementing Regulations (ZATCA Board Resolution No. 01-03-25, 24 March 2025), and ZATCA’s Detailed Guideline Version 6 (May 2026). For informational purposes only. dariba.co is an independent knowledge platform.<\/p>\n<\/div>\n<script>document.querySelectorAll('.dariba-article .faq-q').forEach(function(btn){btn.addEventListener('click',function(){btn.parentElement.classList.toggle('open');});});<\/script>\n<\/body>\n<\/html>\n\n","protected":false},"excerpt":{"rendered":"<p>RETT on Capital Contributions and Corporate Restructuring in Saudi Arabia | Dariba.co RETTTaxable Events Part of RETT in Saudi Arabia: The Complete Guide \u2014 Cluster 2: Taxable Events \u00b7 Article 2.8 01 The Default Rule: Every Transfer to a New Entity Is a Taxable Event When real estate moves from one legal person to another […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[],"class_list":["post-519","post","type-post","status-publish","format-standard","hentry","category-rett"],"_links":{"self":[{"href":"https:\/\/www.dariba.co\/index.php?rest_route=\/wp\/v2\/posts\/519","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.dariba.co\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.dariba.co\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.dariba.co\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.dariba.co\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=519"}],"version-history":[{"count":0,"href":"https:\/\/www.dariba.co\/index.php?rest_route=\/wp\/v2\/posts\/519\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.dariba.co\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=519"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.dariba.co\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=519"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.dariba.co\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=519"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}