In brief
Transfers of real estate made to divide a deceased person's estate among the heirs are exempt from RETT, whether the property moves from the estate to the heirs or between heirs, as long as each heir receives no more than their legal share. Anything beyond that share, and any later sale, is taxable.
When a property owner dies, the real estate in the estate has to reach the heirs somehow. The law does not treat that as a sale, and RETT is not charged on it. That much is well understood.
What is less well understood is where the exemption stops. In our experience, most RETT exposure on inherited property comes from what families do around the division: one heir buying out the others, a quick sale to split the proceeds, or a “fair” allocation that does not match the legal shares.
The Provision: Exact Text
This paragraph sets the criteria for the estate division exemption listed in Article 3(a) of the RETT Law (Royal Decree No. M/84, effective 10 April 2025). ZATCA’s Detailed RETT Guideline covers it at section 5.1.1.
What It Means in Plain English
The estate division RETT exemption means that no RETT is due when property is transferred from a deceased person’s estate to the heirs, or between the heirs, to divide the estate. Each heir must receive no more than their legal share as set out in the inheritance deed. Anything beyond that, and any later sale, is taxable at 5%.
Breaking Down the Provision
“Division of a deceased estate”
The exemption is tied to a specific event: dividing an estate between those entitled to it. ZATCA’s Guideline confirms it covers both legs of a typical division:
- the transfer from the deceased (the estate) to the heirs; and
- transfers among the heirs themselves that are needed to complete the division.
The Guideline gives its reasoning plainly. Dividing an estate is not a sale of the property being divided, so it is not the kind of disposal RETT is designed to tax.
“According to the regulations in force in the Kingdom”
This phrase limits the exemption. The division must follow Saudi inheritance rules, which in practice means the inheritance deed (the deed confirming the heirs and their shares) and, where relevant, a court-approved division. ZATCA reads this as confining the exemption “within the limits of their legal interests, in accordance with the inheritance certificate”.
Two things follow from that:
- An allocation that gives an heir more than their legal share is outside the exemption to the extent of the excess, if that heir pays the others for it.
- A will, the bequeathed portion of up to one third, is not an estate division under this paragraph. It has its own exemption in Article 3(a)(8).
What the exemption does not cover
ZATCA’s Guideline lists the exclusions:
- Later dispositions by heirs. Once an heir owns their share, selling it is an ordinary taxable transaction.
- One heir selling their share to another heir, or to anyone outside the family.
- A sale of estate property before division so the cash can be distributed. That is a sale to a third party, and it is taxable.
ZATCA’s Position
The Guideline’s Example 16 sets out the standard case. A father dies, and the family home is allocated to some of his sons and daughters as part of their share. The transfer is exempt. ZATCA adds three practical points:
- The transaction must still be registered with ZATCA so that the heirs can show the exemption and the notary will accept the transfer.
- If the heirs later sell the house, that sale is taxable. The same applies if they sell before division to share out the proceeds.
- If the house is worth more than the receiving heirs’ shares and they compensate the other heirs for the difference, that difference is a taxable real estate transaction.
Worked Examples
Example 1: A clean division, fully exempt
The late Mr. Saleh leaves three properties and three heirs with equal shares of SAR 2,000,000 each:
| Property | Value | Allocated to |
|---|---|---|
| Land in Jeddah | SAR 2,000,000 | Son A |
| Villa in Riyadh | SAR 2,000,000 | Son B |
| Apartment building | SAR 2,000,000 | Daughter C |
Each heir receives exactly their legal share and no money changes hands. All three transfers are exempt, and no RETT is due. Each must still be registered on ZATCA’s portal before notarization.
Example 2: Equalisation payment
Same estate, but the values differ: the villa is worth SAR 3,000,000, the land SAR 2,000,000 and the apartment building SAR 1,000,000. The family agrees that Son B takes the villa, Son A takes the land and Daughter C takes the apartment building. Son B pays Daughter C SAR 1,000,000 to balance things out.
- Son A’s land and the transfers within each heir’s SAR 2,000,000 share are exempt.
- Son B has received SAR 1,000,000 of value beyond his share and paid Daughter C for it. In substance, Daughter C sold him her interest in the excess.
- RETT is due on the excess: 5% × SAR 1,000,000 = SAR 50,000. Daughter C is the transferor and bears the tax unless the heirs agree otherwise.
Example 3: Selling first, dividing later
The heirs decide nobody wants the villa. They sell it to a third party for SAR 3,000,000 before the estate is divided and split the cash three ways.
This is a sale, not a division. RETT of SAR 150,000 is due on the sale price. The heirs, as sellers, are the transferors, typically acting through a representative.
Example 4: Co-owned property partitioned later
The heirs first take the land in Jeddah jointly, in equal thirds on one ownership deed. That is exempt as an estate division. Two years later they split it into three plots, one each, through the notary.
That later partition is not an estate division, but it may not be a real estate transaction at all. Under Article 2(k), dividing jointly owned property on a single deed is outside RETT if each owner’s share after division matches their share on the deed and no owner pays another. If one sibling’s plot is larger and they pay the others for it, the excess becomes taxable.
Grey Areas
| Situation | Our view |
|---|---|
| An heir renounces their share in favour of others, for nothing | Outside Article 3(a)(1) to the extent the others receive more than their shares. Use the gift exemption in Article 3(a)(7) where the relationship qualifies. |
| Division agreed by the heirs out of court, matching the legal shares | Covered. The key is matching the inheritance deed, not whether a court was involved. |
| Estate includes shares in a real estate company | We expect the same treatment for distribution within legal shares. Buy-outs of shares are taxable. Under Article 2(i), a 30% or larger block may be a real estate transaction. |
| Heir is a non-Saudi | The RETT exemption is not affected by nationality. Whether the heir may keep the property is a separate question under the foreign real estate ownership rules. |
| Estate debts settled by transferring property to a creditor | Not a division among heirs, so not covered. It is a transfer for consideration (settling the debt) and is taxable unless another exemption applies. |
Compliance Checklist
- Obtain the inheritance deed confirming the heirs and their shares.
- Value each property and compare the allocation with each heir’s legal share.
- Identify any equalisation payment or excess allocation. That portion is taxable.
- Register each transfer on ZATCA’s RETT portal on or before notarization, selecting the estate division exemption for the exempt portion.
- Pay RETT on any taxable excess before notarization, and keep the confirmation notices.
- Keep the inheritance deed, valuations and division agreement for at least five years (Article 11(f)).
Common Mistakes
- Assuming “family” means “exempt”. The exemption follows legal shares, not family relationships.
- Ignoring cash top-ups. Equalisation payments are consideration, and ZATCA says so expressly.
- Selling to split the proceeds. That is a taxable sale, however it is described in family correspondence.
- Skipping registration. Exempt does not mean invisible. The notary will not complete the transfer without the ZATCA record.
The Bottom Line
Article 3(a)(1) does exactly what it says. Property can pass from the deceased to the heirs, and between them as part of the division, without RETT. The limit is the inheritance deed: once value moves beyond an heir’s share for consideration, or the property is sold, the transaction is taxable. Families who agree the allocation with those limits in mind, and use the gift and partition rules where they apply, can usually keep the whole division outside RETT.
Key takeaways
- Article 3(a)(1) exempts real estate transfers that divide a deceased person's estate in accordance with the rules in force in the Kingdom.
- ZATCA confines the exemption to the heirs' legal shares as set out in the inheritance deed. Property received beyond an heir's share, paid for by that heir, is a taxable transaction.
- A sale of estate property to a third party, whether before or after division, is taxable in full. Selling first and then dividing the cash does not qualify.
- Equalisation payments between heirs are the usual trap. The heir who gives up value for cash is a transferor, and RETT applies to the excess.
- Later partition of property the heirs co-own on a single deed can fall outside RETT altogether under Article 2(k), if it mirrors their shares and no money changes hands.
- The division must still be registered on ZATCA's RETT portal so that the notary will process the transfer.
Frequently asked questions
Do heirs pay RETT when property is transferred to them from an estate in Saudi Arabia?
No, as long as the transfer divides the estate within each heir's legal share. Article 3(a)(1) of the RETT Implementing Regulations exempts it. The transaction must still be registered on ZATCA's portal so that the exemption is recorded and the notary can complete the transfer.
Is RETT due if one heir takes a property worth more than their share and pays the others?
Yes, on the excess. ZATCA's Guideline treats the difference between the property's value and the heir's legal share, compensated in cash or other assets, as a taxable real estate transaction. The heirs who receive the compensation are effectively selling their interest, so they are the transferors.
If heirs sell the inherited property and split the money, is that exempt?
No. A sale to a third party is a normal taxable transaction, whether it happens before or after the estate is formally divided. RETT of 5% applies to the sale price, within fair market value limits.
Can an heir give up their share to a sibling for free without RETT?
Not under Article 3(a)(1), because the sibling then receives more than their legal share. However, a documented gift between siblings is exempt under the separate gift exemption in Article 3(a)(7), subject to its three-year condition. The two exemptions can work together if the steps are documented properly.
Who registers the estate division with ZATCA?
The transferor or their representative. For an estate, this is typically the heirs acting jointly or through an agent, or a court-appointed administrator or guardian for minor heirs. The Regulations' definition of 'Representative' expressly includes guardians, administrators and judicial guardians.
Does the exemption cover shares in a real estate company held by the deceased?
The provision covers 'real estate transactions' arising on estate division, and a transfer of shares in a real estate company can itself be a real estate transaction. The better view is that distributing such shares to heirs within their legal shares is covered on the same basis. Equalisation payments for shares are treated the same way as for property.
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.
