In brief
For taxable transactions arising from build-own-operate-transfer projects, RETT is calculated on the total value of the disposal, which is the fair market value of the real estate on the date ownership actually passes to the transferee, as determined under Article 4.
BOOT contracts can run for 20 years or more, and the asset at the end looks nothing like the empty plot at the start. Article 2(g), together with Article 4(c), puts the RETT event at the end of the project and values the asset as it is at that point.
The Provision: Exact Text
What It Means in Plain English
For RETT on BOOT projects, the tax arises when the developer hands the asset over, and it is charged on what the asset is worth at that moment, not on the contract price or the value when the contract was signed.
Breaking Down the Provision
- “Total value of the disposal … fair market value.” The base is market value, not cost or contract consideration.
- “On the date of the actual transfer.” Valuation is fixed at handover.
- “As specified in Article (4).” Under Article 4(c), the transfer date is when all conditions related to the transfer of ownership under the contract are met.
ZATCA explains that this reflects “the different nature of this type of contract”, where valuation is based on the transfer date rather than the date the agreement was signed.
ZATCA’s Position
Example 12:
- (A) A 25-year BOOT, with transfer at expiry: tax is due at year 25, payable within 30 days.
- (B) A 25-year BOOT providing for transfer after 12 years once conditions are met: tax is due at year 12.
Worked Example
A landowner signs a 20-year BOOT with an energy company in 2026. The company builds a facility costing SAR 150,000,000, operates it, and transfers ownership in 2046. An accredited valuation at handover puts its value at SAR 90,000,000.
- Base: SAR 90,000,000, the FMV in 2046, not the cost.
- RETT: SAR 4,500,000, payable by the transferor within 30 days of handover.
- If the landowner were a ministry, the transfer would be exempt under Article 3(a)(4).
Grey Areas
| Situation | Our view |
|---|---|
| Staged handovers of different assets | Each asset’s actual transfer date sets its own tax point. |
| Early termination and handback | The actual transfer date is when termination conditions are met. Value at that date. |
| Land already owned by the transferee | Only the transfer of the buildings and structures is a transaction. The land is not re-transferred. |
Common Mistakes
- Accruing RETT at contract signing based on cost.
- Missing the 30-day deadline at handover, decades after signing.
The Bottom Line
Article 2(g) taxes the BOOT handover at its market value at the time. Build the obligation into the concession’s closing checklist, because the people who signed the contract may have moved on by the time handover happens.
Key takeaways
- BOOT transfers are taxed on the fair market value of the real estate on the date ownership actually transfers to the transferee.
- That date is when all contractual conditions for transfer are met (Article 4(c)), not when the contract is signed.
- Payment is due within 30 days of the actual transfer where it is not notarized (Article 5(B)).
- ZATCA's Example 12: a 25-year BOOT is taxed at year 25. A contract providing for transfer at year 12 is taxed at year 12.
- Valuation at handover reflects the asset's condition and the market at that time, decades after signing.
- The transferor at handover, usually the developer or operator, is responsible for registering and paying.
Frequently asked questions
When is RETT due on a BOOT project?
On the date ownership actually transfers to the transferee, which is when all conditions for transfer under the contract are met (Article 4(c)). If the transfer is not notarized, payment is due within 30 days of that date.
What value is RETT charged on in a BOOT project?
The fair market value of the real estate on the date of actual transfer (Article 2(g)), not the original construction cost or the contract price.
Who pays RETT on a BOOT handover?
The transferor, normally the developer or operator handing the asset over. Where the transferee is a public entity, the transfer may be exempt under Article 3(a)(4).
Sources
Based on the RETT Law (Royal Decree No. M/84, effective 10 April 2025), the RETT Implementing Regulations (ZATCA Board Resolution No. 01-03-25 dated 24 March 2025, unofficial English translation) and ZATCA's Detailed RETT Guideline Version 6 (May 2026). The Arabic text prevails. This article is general information, not advice on any specific transaction. dariba.co is an independent knowledge platform and is not affiliated with ZATCA.
