In brief
Article 3(a)(18) exempts real estate transfers between two Saudi companies where one owns all of the other, between a company and a Saudi fund whose units it wholly owns, and between Saudi companies or funds wholly owned by the same persons. All shares or units of the transferee must remain owned, directly or indirectly, by the same persons for five years.
Groups move property for all sorts of reasons: ring-fencing a development in a project company, separating operating assets from investment property, consolidating land before a financing, or preparing a business for sale. When the transfer stays inside a wholly owned group, the economic owner has not changed, and Article 3(a)(18) reflects that.
The key requirement is 100% common ownership, both at the time of the transfer and for five years afterwards.
The Provision: Exact Text
ZATCA’s Detailed RETT Guideline covers this exemption at section 5.1.19.
What It Means in Plain English
The RETT intra-group transfer exemption means that property can move between Saudi companies and funds in a 100% commonly owned group without RETT. That covers parent to subsidiary, subsidiary to parent, sister to sister, and company to a fund it wholly owns. The company or fund receiving the property must stay wholly owned by the same persons for five years.
Breaking Down the Provision
The three qualifying relationships
- Parent and subsidiary. Two Saudi companies, one owning all the shares of the other, directly or indirectly. The wording covers transfers in either direction.
- Company and fund. A Saudi company and a Saudi investment fund whose units the company wholly owns.
- Sister entities. Saudi companies or funds whose shares or units are all owned, directly or indirectly, by the same persons.
“Established in the Kingdom”
Both the transferor and the transferee must be Saudi-established. The owner at the top does not need to be. A foreign parent’s two Saudi subsidiaries can use the exemption.
“All … shares” and “directly or indirectly”
The threshold is 100%. Chains of wholly owned entities count (ZATCA’s Example 53). A single minority shareholder anywhere in the chain between the common owner and either party takes the transfer outside the exemption.
The five-year lock
“All the shares or units” of the transferee must remain owned, directly or indirectly, by the same persons for five years. The lock attaches to the ownership of the company or fund that received the property.
ZATCA’s Position
The Guideline gives four examples, all exempt where ownership is unchanged for five years:
- Example 51. A company transfers property to its 100%-owned subsidiary.
- Example 52. Company A transfers property to a fund whose units it wholly owns.
- Example 53. Company A transfers property to Company C, which is wholly owned by Company B, which is wholly owned by A.
- Example 54. Company B transfers property to Company C, both wholly owned by Company A.
ZATCA describes the purpose as encouraging restructuring without financial burden, while requiring full common ownership to continue for five years.
Worked Examples
Example 1: Ring-fencing a development
HoldCo transfers land worth SAR 80,000,000 to a newly formed, wholly owned project company to develop a mixed-use scheme. Exempt, saving SAR 4,000,000, provided the project company stays 100% owned within the group for five years.
Example 2: Selling a minority stake in year three
In year three, HoldCo sells 20% of the project company to a co-investor. Breach. RETT of SAR 4,000,000 on the original transfer is payable within 30 days.
Example 3: Sister companies of a foreign group
A UAE parent owns 100% of two Saudi LLCs. LLC 1 transfers a warehouse worth SAR 25,000,000 to LLC 2. Exempt. The common owner’s nationality does not matter.
Example 4: The 99% subsidiary
A listed company owns 99% of a subsidiary, and an employee incentive trust holds 1%. A transfer of property to the subsidiary does not qualify. Either take the subsidiary to 100% before the transfer, or use Article 3(a)(11).
Grey Areas
| Situation | Our view |
|---|---|
| Upstream transfer from subsidiary to parent | Covered by the “one of which owns all the other” wording. The lock then applies to the parent’s ownership, which can be difficult for a listed parent. Assess carefully. |
| Sister companies owned by the same family members in different proportions | “The same persons” is satisfied on its face, but ZATCA may expect identical proportions. The conservative view is to align proportions or obtain a ruling. |
| Group restructuring above the transferee within five years | If the ultimate owners stay the same and only intermediate holding companies change, ownership “indirectly” by the same persons arguably continues. Document the analysis. |
| Transferee lists through an IPO within five years | Not a breach under Article 3(c)(1), as ZATCA’s Example 60 illustrates. |
Compliance Checklist
- Map the ownership chain and confirm 100% common ownership at every level.
- Confirm both parties are established in the Kingdom.
- Register the transfer on ZATCA’s RETT portal before notarization, citing Article 3(a)(18).
- Put in place a group-level control requiring tax sign-off for any change in the transferee’s ownership for five years.
- Keep structure charts, share registers and the transfer documents for at least five years after the lock-up ends.
Common Mistakes
- “Substantially owned” is not wholly owned. 99% fails.
- Selling a minority stake in a project company too early.
- Assuming the foreign parent disqualifies the group. It does not.
- Overlooking upstream transfers, where the lock then sits on the parent.
The Bottom Line
Article 3(a)(18) is the main tool for internal restructuring of property within a group. Inside a 100% group, property moves free of RETT. The risk is the five-year lock on the transferee, which can conflict with joint-venture and exit plans. Plan the five years before making the transfer.
Key takeaways
- Article 3(a)(18) covers three relationships: parent and wholly owned subsidiary, company and wholly owned fund, and sister entities wholly owned by the same persons.
- Both parties must be companies or investment funds established in the Kingdom. The common owner can be foreign.
- Ownership must be 100%, directly or indirectly. An 80% or 99% subsidiary does not qualify.
- All shares or units of the transferee must remain owned by the same persons for five years. Selling even a small stake, or admitting a minority investor, breaks the condition.
- Unlike Article 3(a)(17), the transferor here is a company or fund, not an individual. Unlike Article 3(a)(11), there is no audit requirement.
- An IPO of the transferee, or a qualifying merger, does not breach the lock under Article 3(c).
Frequently asked questions
Is transferring property from a parent to a wholly owned subsidiary subject to RETT in Saudi Arabia?
No, if both are established in the Kingdom and the parent owns 100% of the subsidiary, directly or indirectly. Article 3(a)(18) exempts the transfer, provided all the subsidiary's shares remain owned by the same persons for five years.
Do sister companies qualify for the intra-group exemption?
Yes. Transfers between Saudi companies or funds whose shares or units are owned, directly or indirectly, by the same persons are exempt. ZATCA's Guideline, Example 54, confirms a transfer between Companies B and C, both wholly owned by Company A.
Does an 80% owned subsidiary qualify?
No. Article 3(a)(18) requires ownership of all shares or units. For partly owned subsidiaries, consider Article 3(a)(11): a contribution of the property in exchange for new shares, which requires the contributor to hold those shares for five years and the company to be audited.
Can the common owner be a foreign company?
Yes. The text requires the transferor and transferee to be established in the Kingdom, but places no such requirement on the common owner. Two Saudi subsidiaries of the same foreign parent can transfer property between them under this exemption.
What breaks the five-year condition?
Any change that means the transferee's shares or units are no longer all owned by the same persons, directly or indirectly. Examples include selling part of the transferee, issuing shares to a new investor, or selling the parent's interest in the group. RETT then becomes due on the original transfer within 30 days of the breach.
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.
