In brief
Returning real estate to its previous owner because a notarized disposal has been cancelled by mutual consent is exempt from RETT, provided the cancellation occurs within 90 days of notarizing the original disposal, the property's description has not changed and its full value is returned. Under Article 9(a)(3), the RETT paid on the original disposal can then be refunded.
Sometimes a property sale falls through after it has been notarized. Financing is withdrawn, a defect is discovered, or the buyer simply changes their mind. Undoing the sale means transferring the property back, and without relief that would be a second taxable transaction on top of the first.
Article 3(a)(21), together with the refund rule in Article 9(a)(3), allows both parties to return to where they started, as long as they act within 90 days.
The Provision: Exact Text
The companion refund rule, Article 9(a)(3), allows a refund of the original tax on cancellation under this exemption, provided: (a) the previous owner returns the full value to the transferee; (b) the transferee transfers the property back by notarization within 90 days of the original notarization, without any change to its description; and (c) ZATCA is notified under Article 11. ZATCA’s Detailed RETT Guideline covers the exemption at section 5.1.22.
What It Means in Plain English
The RETT cancelled sale exemption means that if you and the other party agree to cancel a notarized property sale within 90 days, transfer the property back unchanged and refund the full price, the transfer back carries no RETT. The seller can also claim back the RETT paid on the original sale.
Breaking Down the Provision
“Cancellation of the notarized real estate disposal … by mutual consent”
The original disposal must have been notarized, and the cancellation must be agreed by both parties. A cancellation imposed by a court judgment, as opposed to agreed by the parties, is not covered by the literal wording.
“Within a period not exceeding (90) days from the date of notarizing”
The clock starts on the notarization date of the original sale. Under Article 9(a)(3)(b), the return transfer must also be notarized within the same 90 days. Agreeing to cancel on day 85 is not enough if the return is notarized on day 95.
“No change occurs to the description of the real estate”
The property must go back as it came: no construction, no subdivision and no new registered rights. ZATCA’s Example 57 refers to the buyer returning the property “in its description as it was at the time of the notarization”.
“Its full value is returned”
The seller must refund the full price. Partial refunds, retentions and set-offs put the exemption at risk.
ZATCA’s Position
In the Guideline’s Example 57, buyer and seller agree to cancel, the property is returned and the full value is refunded. The return is not subject to RETT, provided the cancellation is by mutual consent within 90 days of notarization, the property’s description is unchanged, and the full amount is refunded.
Worked Examples
Example 1: Cancelled sale with a refund
A villa is sold for SAR 2,400,000 and notarized on 1 March. The seller pays RETT of SAR 120,000. On 15 May (day 75), the parties agree to cancel. The seller refunds SAR 2,400,000 and the villa is transferred back by notarization on 20 May (day 80).
- Return transfer: exempt.
- Original RETT of SAR 120,000: refundable under Article 9(a)(3), once ZATCA is notified and a refund request is filed within the Article 9(b) time limit.
Example 2: Day 95
As in Example 1, but the return is notarized on day 95. The exemption fails. The return transfer is a new sale with RETT of SAR 120,000, payable by the original buyer as transferor, and the original RETT is not refundable on this basis. Total RETT: SAR 240,000.
Example 3: Cancellation fee deducted
The seller refunds SAR 2,350,000, keeping SAR 50,000 as a “cancellation fee”. The full value has not been returned, so the exemption is at risk. A cleaner approach is to refund the full SAR 2,400,000 and agree any compensation separately, with clear documentation. Even then, ZATCA may look at the substance.
Example 4: Buyer has started works
The buyer demolished an internal wall and began a renovation before the cancellation. The property’s description has arguably changed. Cosmetic works are unlikely to matter. Structural changes or new permits are a real risk.
Grey Areas
| Situation | Our view |
|---|---|
| Cancellation ordered by a court for defects | Not “mutual consent”. Consider Article 9(a)(2), the refund route for incomplete transactions, and take advice on how the return transfer is treated. |
| Off-plan sale cancelled before handover | Off-plan RETT is due at notarization of the ownership transfer. If notarization has not happened, there may be no taxable transaction to undo. |
| Seller refunds the price in instalments | The full value must be returned. Make sure it is fully settled within the period, or at least before the refund claim. |
| Buyer had mortgaged the property to a bank | The bank’s registered right is a change in legal status. Release it before the return. |
Compliance Checklist
- Diary day 90 from the original notarization date.
- Document the mutual cancellation agreement.
- Refund the full price and keep proof of payment.
- Notarize the return transfer within 90 days, and register it on ZATCA’s portal citing Article 3(a)(21).
- Notify ZATCA of the cancellation within the Article 11 timeframe, and file the Article 9 refund request for the original RETT within the time limit.
Common Mistakes
- Counting the 90 days from the cancellation agreement instead of from the original notarization.
- Keeping back fees from the refunded price.
- Forgetting to claim the refund of the original RETT.
The Bottom Line
Article 3(a)(21) allows a failed sale to be reversed without any RETT cost, provided the parties move quickly and cleanly: within 90 days, full refund, property unchanged, and ZATCA notified. If any of these is missed, RETT may be due twice, once on the original sale and again on the return.
Key takeaways
- Article 3(a)(21) exempts the return transfer when a notarized real estate sale is cancelled by mutual consent within 90 days of notarization.
- Three conditions apply: mutual consent, no change in the property's description, and return of the full value.
- Under Article 9(a)(3), the transferor can claim a refund of the RETT paid on the original sale, provided the return is notarized within 90 days and ZATCA is notified.
- Deducting fees or charges from the refunded price fails the 'full value' test. Renovations or subdivision fail the 'no change' test.
- A cancellation on day 91 or later is treated as a new sale, and RETT applies to both transactions.
- Cancellations ordered by a court, as opposed to mutual consent, fall outside the text. Consider the refund route for incomplete transactions under Article 9(a)(2).
Frequently asked questions
Is RETT payable when a property sale is cancelled and the property returned?
Not if the cancellation is by mutual consent within 90 days of notarizing the original sale, the property is returned unchanged, and the full price is refunded. Article 3(a)(21) of the RETT Implementing Regulations exempts the return transfer.
Can the seller get back the RETT paid on the original sale?
Yes. Article 9(a)(3) allows a refund where the full value is returned to the buyer, the property is transferred back by notarization within 90 days of the original notarization without any change to its description, and ZATCA is notified under Article 11. The refund request must be filed within the time limits in Article 9(b).
What if we cancel after 90 days?
The exemption does not apply. The return transfer is treated as a new real estate transaction, so RETT is due on it, and the RETT on the original sale is not refundable on this basis.
Does a small deduction from the refunded price affect the exemption?
Yes, it can. The provision requires 'its full value' to be returned. Keeping back administration fees or a cancellation charge from the price means the full value has not been returned, and the exemption is at risk. Settle any fees separately and keep clear documentation.
What counts as a change in the property's description?
Any change to the property as notarized: building works, renovations that change its character, subdivision, merging with another plot, or new rights being registered over it. Minor wear does not change the description. Physical or legal alterations do.
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.
