In brief
A deceptive transaction arises where the parties to one or more real estate transactions create documents that give the transaction a different form, concealing the real transaction, or use any other arrangement that does not reflect the actual rights and obligations arising from it. RETT is then calculated on the real transaction.
Every transaction tax creates an incentive to change the label on a transaction: call a sale a lease, call a paid transfer a gift, or record a lower price and settle the difference privately. Article 6 is ZATCA’s answer. The tax follows what really happened.
The Provision: Exact Text
What It Means in Plain English
Under the rules on RETT deceptive transactions, if documents dress up a real estate deal as something else, or the arrangements do not match the parties’ real rights and obligations, ZATCA ignores the label and charges RETT on the real transaction.
Breaking Down the Provision
Limb 1: Documents giving “a different form”
The parties document the transaction as something it is not. For example, a “lease” that operates as a sale, or a “loan” secured by property where the lender in fact takes the property for good.
Limb 2: “Any other … arrangements that do not reflect the actual rights and obligations”
This is a broad catch-all. It covers nominee holdings, side letters, back-to-back agreements, and multi-step structures where the documents taken together do not match what the parties actually agreed.
“One or more real estate transactions”
ZATCA can look at a series of transactions together. Splitting a deal into several pieces that are each harmless on their own does not prevent ZATCA from taxing the combined reality.
“The tax is calculated on the basis of the real transaction”
The remedy is recharacterisation: RETT is assessed on what actually happened, at its real value. Penalties are a separate question, dealt with below.
ZATCA’s Position
The Guideline describes fictitious and concealed contracts as arrangements that do not reflect the actual rights and obligations, and confirms that tax is calculated on the actual transaction. In its Example 15, two persons agree in an unofficial document that one will use the other’s property while nominal ownership stays with the first. ZATCA “has the right to establish the tax-triggering event of the transaction”.
The Guideline’s evasion examples (section 7.3) include manipulating land areas on maps and deeds during partition, and exploiting exemptions unlawfully.
Worked Examples
Example 1: Understated price with a side payment
A building is sold for SAR 10,000,000. The deed records SAR 6,000,000, and SAR 4,000,000 is paid separately as a “consultancy fee”. ZATCA taxes the real price, so RETT is SAR 500,000 rather than SAR 300,000. The deliberate understatement exposes the seller to an evasion fine of up to three times the evaded SAR 200,000. The buyer can be jointly liable under Article 7(B)(1).
Example 2: “Gift” to a brother with a hidden payment
A notarized gift of land to a brother is backed by a private agreement under which the brother pays SAR 1,500,000. The real transaction is a sale. The gift exemption under Article 3(a)(7) falls away, and RETT applies to the price.
Example 3: Back-to-back leases
A landowner grants a 49-year lease with an automatic, rent-free renewal for another 49 years and an option for the tenant to buy the land for SAR 1. In substance, this is a transfer of ownership or a right to use for more than 50 years. ZATCA can treat it as a taxable disposal under Articles 2(f) and 6.
Example 4: Genuine structure, no issue
A landowner contributes land to a company in exchange for shares, meets the Article 3(a)(11) conditions, and holds the shares for five years. The documents match the reality, so Article 6 does not apply.
Grey Areas
| Situation | Our view |
|---|---|
| Commercial reasons coexist with a tax saving | Article 6 asks whether the documents conceal the real transaction, not whether the parties were motivated by tax. Genuine and properly implemented structures are defensible. |
| Price below market for genuine family or commercial reasons | This is mainly a valuation question under Article 8. ZATCA can apply fair market value without any finding of deception. |
| Unregistered nominee ownership from before 2020 | Possibly within the transitional rules. Disclose and take advice. |
Compliance Checklist
- Make sure the documents reflect the real commercial deal, including every payment.
- Disclose all consideration on the RETT registration, including in-kind items and any debt assumed.
- For multi-step structures, document the commercial rationale for each step.
- Avoid side letters that change price, title or conditions without declaring them.
Common Mistakes
- Recording a lower price to reduce the tax.
- Labelling paid transfers as gifts.
- Assuming long or renewable leases can never be treated as sales.
The Bottom Line
Article 6 makes RETT a tax on substance. The documents must tell the true story of the transaction. When they do not, ZATCA taxes the real transaction, and if concealment was intended, the penalties can be several times the tax saved.
Key takeaways
- Article 6 allows ZATCA to disregard documents that disguise the true nature of a real estate transaction and to tax the real one.
- Two forms are covered: documents that give the transaction a different form, and any other arrangement that does not reflect the actual rights and obligations.
- Typical targets include sales disguised as leases or gifts, understated prices with side payments, and nominee ownership arrangements.
- ZATCA's Guideline, Example 15, gives the case of an unofficial agreement where one party enjoys the property while nominal title stays with the owner. ZATCA can establish the taxable event.
- Where concealment is intended to evade tax, the evasion fine of up to three times the tax can apply, and the transferee can be held jointly liable.
- Genuine commercial structures are not caught. The test is whether the documents reflect the parties' real rights and obligations.
Frequently asked questions
What is a deceptive transaction for RETT purposes?
Under Article 6 of the RETT Implementing Regulations, it is a transaction where the parties create documents that give it a different form and conceal the real transaction, or use other arrangements that do not reflect the actual rights and obligations. RETT is calculated on the real transaction instead.
Can ZATCA tax a 'lease' as a sale?
Yes, if the lease is in substance a transfer of ownership or a right to use exceeding 50 years. Examples include a lease with nominal rent and an automatic transfer of title, or a series of renewable leases designed to stay under the 50-year threshold.
What happens if the declared price is lower than the real price?
ZATCA will calculate RETT on the real consideration, including any side payment. Where the understatement is deliberate, it may be treated as evasion, with a fine of up to three times the tax. Under Article 7(B), the buyer can be held jointly liable for arranging to reduce the tax.
Does Article 6 apply to legitimate tax planning?
Article 6 targets documents that hide the real transaction. Choosing a genuine structure that the Regulations exempt, and actually carrying it out as documented, is not deception. The risk arises when the documents and the reality diverge.
Sources
- ZATCA — Real Estate Transaction Tax Law and Implementing Regulations
- ZATCA — Detailed Guideline for the Real Estate Transaction Tax (Version 6, May 2026)Section 4.6 and Example 15; Section 7.3
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.
