In brief
A real estate transaction is exempt from RETT where either party is a foreign government, an international organization, a diplomatic or military authority or mission, or a member of the diplomatic, consular or military corps accredited in the Kingdom, provided there is reciprocity, meaning the other state gives Saudi Arabia's equivalent representatives the same treatment.
Riyadh hosts well over a hundred diplomatic missions, along with international organizations and military liaison offices. Many of them own their chanceries and residences, and they buy, sell and relocate. Article 3(a)(12) applies the long-standing international practice of exempting diplomatic property from transfer taxes, on the usual condition of reciprocity.
The Provision: Exact Text
ZATCA’s Detailed RETT Guideline covers this exemption at section 5.1.13.
What It Means in Plain English
The RETT diplomatic exemption means that if a foreign government, an international organization, an embassy or military mission, or an accredited diplomat is either the buyer or the seller in a real estate transaction, no RETT is due. This applies only where the other country gives Saudi Arabia’s missions and diplomats the same treatment.
Breaking Down the Provision
“One of the parties to the transaction”
Most RETT exemptions focus on the transferee (Article 3(a)(4)) or the transferor (Article 3(a)(5)). This one applies if either party qualifies. A mission selling to a Saudi buyer and a Saudi seller selling to a mission are both covered.
The qualifying parties
- Foreign governments.
- International organizations.
- Diplomatic or military authorities or missions, such as embassies, consulates and military attaché offices.
- Members of the diplomatic, consular or military corps accredited in the Kingdom. Accreditation is the key word. Locally engaged staff, family members and honorary representatives who are not accredited do not qualify on this basis.
“If there is reciprocity”
This is the controlling condition. The foreign state, or organization, must give Saudi Arabia’s equivalent representatives the same treatment, meaning exemption from any tax on buying or selling real estate in that state. ZATCA’s Guideline says this explicitly in its example.
ZATCA’s Position
In the Guideline’s Example 39, an embassy moving its headquarters sells its old building for SAR 4,000,000 and buys a new one for SAR 6,000,000. Both transactions are exempt, provided it is confirmed that the Saudi diplomatic mission receives the same treatment in the embassy’s home country, so that it is exempt from any tax there on buying or selling real estate.
Worked Examples
Example 1: Embassy relocation with reciprocity
Using ZATCA’s example:
| Transaction | Transferor | Without exemption | With Article 3(a)(12) |
|---|---|---|---|
| Sale of old chancery, SAR 4,000,000 | Embassy | SAR 200,000 | Nil |
| Purchase of new chancery, SAR 6,000,000 | Saudi seller | SAR 300,000 | Nil |
Both transactions should be registered on ZATCA’s portal, with evidence of status and reciprocity.
Example 2: No reciprocity
A mission of a state that charges Saudi missions a property transfer tax buys a residence for SAR 5,000,000. Reciprocity is absent, so the exemption is not available. The Saudi seller is liable for RETT of SAR 250,000 and will normally price it in.
Example 3: Accredited diplomat buying privately
An accredited counsellor at a foreign embassy buys an apartment in his own name for SAR 2,200,000. If reciprocity applies to accredited diplomats, the transaction is exempt, and the seller saves SAR 110,000. If the buyer were a locally hired administrative officer without diplomatic accreditation, the purchase would be taxable.
Example 4: International organization office
An international organization with its regional office in Riyadh buys office space. It is exempt if reciprocity or equivalent treatment is established, typically under the organization’s headquarters or host arrangements with the Kingdom.
Grey Areas
| Situation | Our view |
|---|---|
| Property bought through a company owned by a foreign government | The transferee is the company, not the government. Generally not covered unless the vehicle is treated as part of the state’s mission. Proceed carefully. |
| Diplomat sells the property after their posting ends and accreditation lapses | Status should be tested at the date of the transaction. After accreditation ends, the sale is likely taxable. |
| Reciprocity under the home state’s law is partial, for example an exemption for chanceries only | Apply the exemption only to the matching categories of transaction. |
Compliance Checklist
- Confirm the party’s status: government, international organization, mission, or accredited member of the corps.
- Obtain evidence of reciprocity, normally through the Ministry of Foreign Affairs.
- Register the transaction on ZATCA’s RETT portal before notarization, citing Article 3(a)(12).
- Keep the accreditation documents, the reciprocity confirmation and the deeds for at least five years.
Common Mistakes
- Assuming every foreign-government transaction is exempt. Reciprocity is essential.
- Extending the exemption to non-accredited staff.
- Overlooking the seller’s position. When a mission buys, it is the Saudi seller who benefits and who needs the evidence.
The Bottom Line
Article 3(a)(12) follows international diplomatic practice: missions and accredited diplomats deal in Saudi property free of RETT, as long as their home states give Saudi missions the same treatment. Status and reciprocity both need documentary evidence. Saudi counterparties should obtain that evidence before the price is agreed, because they are the ones who would otherwise pay the tax.
Key takeaways
- Article 3(a)(12) exempts real estate transactions where one of the parties is a foreign government, international organization, diplomatic or military mission, or an accredited member of the diplomatic, consular or military corps.
- It works in both directions. An embassy's sale of its old premises and its purchase of new premises can both be exempt.
- Reciprocity is the controlling condition: the foreign state must give Saudi missions equivalent relief from real estate transfer taxes.
- Individuals qualify only if they are accredited members of the diplomatic, consular or military corps in the Kingdom. Local staff and family members are not covered unless separately accredited.
- When the mission is the buyer, the exemption relieves the Saudi seller, who would otherwise be the transferor liable for RETT.
- Obtain documentary evidence of status and reciprocity, typically through the Ministry of Foreign Affairs, before registering the transaction.
Frequently asked questions
Do embassies pay RETT on property purchases in Saudi Arabia?
Not if reciprocity applies. Article 3(a)(12) of the RETT Implementing Regulations exempts real estate transactions where one party is a foreign diplomatic mission, provided the mission's home country gives Saudi diplomatic missions the same treatment. ZATCA's Guideline confirms both an embassy's sale and its purchase can be exempt.
What does reciprocity mean for the RETT exemption?
It means the foreign state gives Saudi Arabia's government, missions or diplomats an equivalent exemption from tax on buying or selling real estate in that state. If the foreign state taxes Saudi missions on such transactions, the exemption is not available for that state's mission in the Kingdom.
Is a diplomat buying a private home in Riyadh exempt from RETT?
Potentially, if they are a member of the diplomatic, consular or military corps accredited in the Kingdom and reciprocity applies. The exemption relieves the seller, who would otherwise pay RETT as transferor. Evidence of accreditation and reciprocity should be in place before the transaction is registered.
Are international organizations covered?
Yes. International organizations are listed expressly alongside foreign governments and missions. Reciprocity, or equivalent treatment under the organization's arrangements with the Kingdom, should be documented.
Who benefits when the embassy is the buyer?
The seller. Under the RETT Law, the transferor (seller) is liable for RETT. Because one party is a qualifying mission, the transaction is exempt, and the Saudi seller pays no RETT. The price should reflect that.
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.
