In brief
A real estate transaction arising from the expropriation of property, or its temporary seizure, under the applicable regulations or regulatory instruments is exempt from RETT. The exemption also covers the return of the property to the original owner under those regulations. Transfers made outside the statutory framework are taxable unless another exemption applies.
Major infrastructure programmes across the Kingdom, including roads, metro lines and urban regeneration, mean that many owners receive expropriation decisions. It would be unfair to charge an owner who never chose to sell a 5% tax on the compensation. Article 3(a)(6) prevents that.
The provision is short. It covers three situations: permanent expropriation, temporary seizure, and the return of property to its owner. The one condition that matters is that the statutory procedure is followed.
The Provision: Exact Text
ZATCA’s Detailed RETT Guideline covers this exemption at section 5.1.6.
What It Means in Plain English
The expropriation RETT exemption means that if the state takes your property for public benefit, or temporarily seizes it, under the applicable regulations, you pay no RETT on the transfer or on the compensation. If the property is later returned to you under those regulations, the return is also exempt.
Breaking Down the Provision
“Expropriation of the real estate”
This is the compulsory acquisition of private property for public benefit, with compensation, under Saudi Arabia’s expropriation regulations. The owner does not choose to sell. The transfer is imposed.
“Or temporary seizure of it”
Temporary seizure means the state takes possession of property for a limited period, for example as a construction staging area. It is less common, and it often involves no transfer of ownership at all. The text exempts it expressly so there is no doubt.
“In accordance with the relevant issued regulations or regulatory instruments”
This is the condition. ZATCA’s Guideline is clear that the exemption applies only where the expropriation follows the approved statutory procedures. Transfers outside that framework are taxable. In practice, the evidence is the expropriation decision issued by the competent authority.
“Including the return of the real estate to the original owner”
If a project is cancelled or the land is no longer needed, the regulations may require it to be returned to the original owner. That transfer back is also exempt, so the owner is not taxed for having property taken and then returned.
ZATCA’s Position
The Guideline’s Example 25 is the standard case. A decision is issued to expropriate a property for a road, with SAR 800,000 compensation to the owner. The owner is exempt from RETT before the transfer or notarization, because ownership passed compulsorily for public benefit under a decision of a competent authority.
ZATCA adds that transactions outside the statutory framework are subject to RETT.
Worked Examples
Example 1: Expropriation for a metro line
A commercial plot in Riyadh is expropriated for a metro station. The owner receives SAR 12,000,000 in compensation. The transfer is exempt, so the owner does not pay the SAR 600,000 that would otherwise be due. Register the transaction with the expropriation decision attached.
Example 2: Compensation partly in replacement land
An owner receives SAR 5,000,000 in cash plus a replacement plot worth SAR 3,000,000.
- Transfer of the expropriated land to the state: exempt under Article 3(a)(6).
- Transfer of the replacement plot from the state to the owner: this forms part of the statutory compensation. In our view it falls within Article 3(a)(6), and in any event within Article 3(a)(5) if the state acts in its public authority capacity. Make sure the expropriation decision documents the in-kind compensation.
Example 3: Negotiated sale before formal expropriation
A ministry approaches an owner and agrees to buy the land at a negotiated price, without issuing a formal expropriation decision.
Article 3(a)(6) may not apply, because the statutory expropriation procedure was not followed. The sale is still exempt under Article 3(a)(4), because the buyer is a public entity. The result is the same, under a different provision.
Example 4: Project cancelled, land returned
Two years later the project is cancelled, and the land is returned to the original owner under the regulations. The return is exempt. Any refund of compensation the owner makes is part of the statutory process, not consideration in a new sale.
Grey Areas
| Situation | Our view |
|---|---|
| Partial expropriation, where the owner keeps the rest of the plot | Only the expropriated part is transferred. Exempt. The remainder is unaffected. |
| A concession company acquires land for a state project on commercial terms | Not an expropriation unless carried out under the regulations. Check Article 3(a)(4)(c) for a government direction. |
| Owner sells the remaining land after expropriation | An ordinary taxable sale. |
| Tenants or usufruct holders compensated on expropriation | Their rights end. A usufruct over 50 years being extinguished as part of the expropriation should be covered by the same exemption. |
Compliance Checklist
- Obtain the expropriation or seizure decision from the competent authority.
- Register the transaction on ZATCA’s RETT portal before notarization, citing Article 3(a)(6).
- Document any in-kind compensation within the same decision or process.
- For a later return of the property, register it as well and reference the original decision.
- Keep the decision, compensation records and deeds for at least five years.
Common Mistakes
- Assuming any transaction with the government is covered by this article. Negotiated sales may need Article 3(a)(4) instead.
- Not registering. The exemption must still be recorded with ZATCA before the notary acts.
- Leaving replacement land undocumented. Without paperwork linking it to the expropriation, it can look like a separate taxable transfer.
The Bottom Line
Article 3(a)(6) works as intended: owners who lose property to public projects do not also pay RETT on the compensation, and property that is returned comes back tax-free. The only real requirement is procedural. Keep the expropriation decision, register the transaction, and make sure any in-kind compensation forms part of the same documented process.
Key takeaways
- Article 3(a)(6) exempts real estate transactions arising from expropriation or temporary seizure under the applicable regulations, so the owner pays no RETT on the compensation.
- The return of expropriated or seized property to the original owner, under the same regulations, is also exempt.
- ZATCA requires the expropriation to follow the approved statutory procedures. Transfers outside that framework are taxable.
- A negotiated sale to a government body in place of formal expropriation is usually exempt anyway under Article 3(a)(4), because the buyer is a public entity.
- Replacement land given to the owner as compensation in kind should be documented as part of the expropriation, so that both transfers fall within the exemption.
- The transfer must still be registered on ZATCA's RETT portal, supported by the expropriation decision.
Frequently asked questions
Do I pay RETT when the government expropriates my property?
No. Article 3(a)(6) of the RETT Implementing Regulations exempts real estate transactions arising from expropriation under the applicable regulations. ZATCA's Guideline gives the example of land expropriated for a road with SAR 800,000 compensation, which is exempt.
Is RETT due when expropriated land is returned to me?
No. The exemption expressly includes 'the return of the real estate to the original owner' under the expropriation or seizure regulations, for example where the project is cancelled and the property is restored.
What if I negotiate a sale to the government instead of waiting for expropriation?
If the expropriation procedure is not followed, Article 3(a)(6) may not apply. However, a sale to a ministry or other public entity is generally exempt under Article 3(a)(4), because the transferee is a public entity. Either way, keep the documents showing who the transferee is.
Does temporary seizure trigger RETT?
Temporary seizure of property under the applicable regulations, and its return afterwards, is expressly exempt under Article 3(a)(6). In most cases, temporary seizure does not transfer ownership in any event.
Is compensation paid by a private developer for land needed for a public project covered?
Only if the transfer is made through an expropriation under the applicable regulations, or the transferee qualifies under Article 3(a)(4). A private developer buying land on commercial terms, even for a project with public benefits, is a normal taxable transaction.
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.
