In brief
A real estate transaction carried out to implement a forced sale order issued by a competent court is exempt from RETT where it occurs in a liquidation or administrative liquidation under the Bankruptcy Law and its Implementing Regulations. Sales in other procedures, voluntary sales, and ordinary enforcement auctions outside bankruptcy are not covered by this paragraph.
In a bankruptcy liquidation, every riyal of tax is a riyal that creditors do not recover. A 5% RETT charge on a distressed property sale falls, in practice, on the creditors. Article 3(a)(15) removes it, but only within a narrow procedural setting.
The Provision: Exact Text
ZATCA’s Detailed RETT Guideline covers this exemption at section 5.1.16.
What It Means in Plain English
The RETT forced sale bankruptcy exemption means that when a court orders the sale of a debtor’s property as part of a liquidation or administrative liquidation under the Saudi Bankruptcy Law, no RETT is due. All three elements must be present: a court order, a forced sale, and one of those two procedures.
Breaking Down the Provision
“In implementation of a forced sale order issued by a competent court”
The sale must carry out a court order. A liquidator’s ordinary decision to sell is not enough on its own unless the court’s order covers the sale. In practice, the liquidator should make sure the court’s sale order or authorisation specifically identifies the property.
“In cases of liquidation and administrative liquidation”
The Bankruptcy Law offers several procedures, including protective settlement, financial reorganisation, liquidation, versions of these for small debtors, and administrative liquidation. Only liquidation and administrative liquidation are named. In our view, the small-debtor liquidation procedure is also within the text, since it is a liquidation under the same Law. Selling assets to fund a reorganisation is not covered.
“In accordance with the Bankruptcy Law and its Implementing Regulations”
The procedure must be a Bankruptcy Law procedure. A voluntary liquidation of a solvent company under the Companies Law, and an enforcement sale to satisfy a judgment under the Enforcement Law, are outside the text.
ZATCA’s Position
The Guideline explains that the exemption is intended to facilitate court-ordered property sales in liquidation, speeding up sales and debt repayment. In its Example 43, a company files for bankruptcy, the court issues a forced sale order for one of its properties within the liquidation, and the liquidation body carries out the sale. Exempt.
Worked Examples
Example 1: Liquidation sale
A contracting company enters liquidation. The court orders the sale of its headquarters, which sells at auction for SAR 40,000,000. Exempt, so the SAR 2,000,000 of RETT that would otherwise fall on the estate is preserved for creditors.
Example 2: Sale during financial reorganisation
A developer in financial reorganisation sells a plot for SAR 10,000,000 to fund its plan, with court approval. Reorganisation is not liquidation, so Article 3(a)(15) does not apply. RETT of SAR 500,000 is due, and the developer, as transferor, bears it within the reorganisation.
Example 3: Enforcement auction outside bankruptcy
A creditor obtains a judgment, and the enforcement court auctions the debtor’s villa for SAR 3,000,000. This is not a Bankruptcy Law liquidation, so Article 3(a)(15) does not cover it on its terms. RETT is likely due, and the auction terms should allocate it.
Example 4: Forced sale during another exemption’s lock-up
Two years earlier, a parent company transferred land to its wholly owned subsidiary under Article 3(a)(18), subject to a five-year ownership lock. The parent now enters liquidation, and the court orders the sale of the subsidiary’s shares.
Under Article 3(c)(2), an exempt real estate disposal implementing a court’s forced sale order does not breach the non-disposal condition. The earlier group transfer stays exempt.
Grey Areas
| Situation | Our view |
|---|---|
| Liquidator sells by private treaty with general court authority rather than a specific order | Higher risk. Obtain a specific court order or confirmation covering the property. |
| Sale of shares in a real estate company in liquidation | A share transfer can be a real estate transaction. If it is carried out under a forced sale order in liquidation, the exemption should apply on the same basis. |
| Secured creditor enforces outside the bankruptcy with court permission | Depends on whether the sale is “in implementation of a forced sale order” within the liquidation. Obtain advice. |
Compliance Checklist
- Confirm the procedure is liquidation or administrative liquidation under the Bankruptcy Law.
- Obtain the court’s forced sale order identifying the property.
- The liquidator registers the sale on ZATCA’s RETT portal before notarization, as the debtor’s representative.
- If the property was subject to an earlier exemption with a holding period, record the reliance on Article 3(c)(2).
- Keep the court orders and sale records for at least five years.
Common Mistakes
- Applying the exemption to every insolvency sale. Reorganisation sales are excluded.
- Treating enforcement auctions as bankruptcy sales.
- Selling without a specific court order and assuming the exemption follows.
The Bottom Line
Article 3(a)(15) keeps RETT from reducing creditor recoveries in formal liquidations. It requires a court-ordered forced sale in liquidation or administrative liquidation under the Bankruptcy Law. Liquidators should get the court order in place first, and remember that Article 3(c)(2) also protects any earlier exemptions on the debtor’s property.
Key takeaways
- Article 3(a)(15) exempts real estate sales carried out under a court's forced sale order in liquidation or administrative liquidation under the Bankruptcy Law.
- ZATCA's Guideline gives the policy reason as faster sales and faster repayment of creditors.
- Protective settlement and financial reorganisation are not liquidation procedures, so sales during them are not covered by this paragraph.
- Sales by a liquidator without a court order, and voluntary liquidations under the Companies Law, fall outside the text.
- Under Article 3(c)(2), an exempt forced sale does not breach the holding period of another exemption, such as a lock-up under Article 3(a)(11) or 3(a)(18).
- The liquidator, as the debtor's representative, should still register the sale on ZATCA's RETT portal before notarization.
Frequently asked questions
Is RETT payable on property sold in a Saudi bankruptcy?
Not where the sale implements a forced sale order of a competent court in a liquidation or administrative liquidation under the Bankruptcy Law. Article 3(a)(15) of the RETT Implementing Regulations exempts it. ZATCA's Guideline confirms this with a company in liquidation whose property is sold under a court order.
Does the exemption apply in financial reorganisation?
No. Article 3(a)(15) refers only to liquidation and administrative liquidation. Sales in protective settlement or financial reorganisation are assessed under the general rules, so they are taxable unless another exemption applies.
Is a court enforcement auction of a debtor's property exempt from RETT?
Not under Article 3(a)(15), unless it is part of a liquidation or administrative liquidation under the Bankruptcy Law. Ordinary enforcement sales to satisfy a judgment debt fall outside the text.
Who is liable for RETT in a bankruptcy sale?
Where the exemption applies, no RETT is due. Where it does not, the debtor is the transferor, acting through the liquidator or trustee, who is a 'Representative' under the Regulations. The liability is then dealt with in the bankruptcy process.
Can a forced sale break another RETT exemption?
No. Article 3(c)(2) provides that a real estate disposal exempt under the Regulations because it implements a court's forced sale order does not breach the non-disposal conditions of other exemptions. A company holding property under a five-year lock-up is therefore not penalised for a court-ordered sale.
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.
