In brief
A real estate transaction is exempt from RETT where the transferee, acquiring a direct or indirect interest in the property, is a public entity or public legal person, a civil society organization or association with public interest status, an entity or project designated by government guidance for public-interest purposes, or an entity or project that otherwise holds public interest status in the Kingdom.
Sellers often ask whether RETT is due when the buyer is the government. The answer is no, and the exemption is broader than most people expect. It covers full-price sales, it applies whatever the buyer plans to do with the property, and it extends beyond ministries to public-interest associations and designated projects.
The risk lies in deciding who qualifies as a public body. In a market full of state-owned companies, the difference between a public legal person and a commercial company owned by the state is worth 5% of the price.
The Provision: Exact Text
ZATCA’s Detailed RETT Guideline covers this exemption at section 5.1.4.
What It Means in Plain English
This RETT exemption for sales to government means you pay no RETT on selling or transferring real estate to a qualifying public body. That includes government ministries and authorities, public legal persons, non-profit organizations with public-interest status, and projects the government has designated for public-interest purposes. The price and the buyer’s intended use do not matter.
Breaking Down the Provision
The exemption follows the transferee
Everything turns on who receives the property. The seller can be anyone: an individual, a company or a fund. The buyer must fall within one of the four categories.
“Who obtains a direct or indirect share in the real estate”
The words “direct or indirect” extend the exemption beyond title transfers. If a qualifying body acquires shares in a real estate company, that acquisition can itself be a real estate transaction under Article 2(i), and it can be exempt here.
Category (a): Public entities and public legal persons
Any ministry, department, authority or centre that forms part of the government is expressly included. This also covers public legal persons with independent legal personality, such as public authorities and, in our view, public universities and municipalities.
The difficult cases are state-owned companies. A joint stock company owned by the state or a sovereign fund is a commercial company under the Companies Law. It is not a “public legal person”. It qualifies only if it fits category (c) or (d).
Category (b): Public-interest civil society organizations
This covers organizations whose bylaws aim at the public interest under the Civil Society Associations and Organizations Law, and associations granted public interest status. Unlike Article 3(a)(3), there is no “without consideration” requirement, so a sale to such an association can be exempt.
Categories (c) and (d): Public-interest entities and projects
- (c) covers an entity or project where the government has issued guidance to transfer real estate ownership for public-interest purposes. This is how a state-linked company receiving land for a national project can qualify.
- (d) covers any entity or project that holds public interest status in the Kingdom.
For both, the evidence is a formal instrument: a government directive, cabinet decision or status certificate.
ZATCA’s Position
The Guideline makes three points:
- The exemption applies to purchases by these bodies regardless of the purpose or use of the property.
- In practice, buyers often bear RETT commercially, so this exemption removes the burden from public bodies.
- “Entities and projects of public benefit” means those holding that status under the Civil Society Associations and Organizations Law.
Its examples: in Example 21, a ministry buys property for SAR 1,500,000 for its own use, and it is exempt. In Example 22, a public authority buys a commercial building for SAR 10,000,000 to earn revenue, and it is still exempt.
Worked Examples
Example 1: Sale to a ministry
An investor sells a building to a ministry for SAR 15,000,000. It is exempt, and the SAR 750,000 that would otherwise be due is not payable. The investor registers the transaction on ZATCA’s portal, citing Article 3(a)(4)(a).
Example 2: Sale to a state-owned developer
The same investor sells land to a joint stock company wholly owned by a state fund for SAR 20,000,000.
Being owned by the state does not make the company a public legal person, so category (a) does not apply. Unless the company holds public interest status, or the government has issued guidance directing this transfer for a public-interest purpose, the sale is taxable. RETT is SAR 1,000,000.
Example 3: Land for a national project under government direction
A Council of Ministers decision directs that certain privately owned plots be transferred to a designated entity for a public infrastructure project. The owners transfer their land for compensation.
This is exempt under category (c). Keep a copy of the government instrument with the deed. If the transfer happens through formal expropriation instead, Article 3(a)(6) applies as well.
Example 4: Discounted sale to a public-interest association
A family sells a school building worth SAR 8,000,000 to an education association with public interest status for SAR 3,000,000. It is exempt under category (b), even though there is consideration.
Grey Areas
| Situation | Our view |
|---|---|
| Sale to a sovereign wealth fund itself, as opposed to its portfolio companies | Depends on the fund’s legal nature under its own statute. If it is a public legal person, it is covered. Obtain confirmation. |
| Sale to a government-owned company acting as the government’s agent | The transferee, legally, is the company. Unless (c) or (d) applies, treat it as taxable. Agency arrangements need careful documentation. |
| Sale to a public university’s endowment company | The company is a separate commercial entity, so it is not covered by (a). Check for public interest status. |
| Sale to a foreign government | Not a Saudi public entity. Consider Article 3(a)(12), which depends on reciprocity. |
Compliance Checklist
- Identify the transferee’s exact legal form from its establishing instrument.
- Map it to one of categories (a) to (d) and obtain the supporting document.
- Register the transaction on ZATCA’s RETT portal before notarization, citing Article 3(a)(4).
- Make sure the price reflects that no RETT is due, so that neither side bears a phantom cost.
- Keep the status evidence with the deed and registration notice for at least five years.
Common Mistakes
- Assuming “government-linked” means exempt. State-owned companies usually are not public legal persons.
- Assuming only gifts qualify. Sales are covered in full.
- Missing the association route. Public-interest associations buying property are covered by Article 3(a)(4)(b).
- Not getting the evidence. ZATCA will ask for the transferee’s status document on review.
The Bottom Line
Article 3(a)(4) gives full relief on sales to the state and to recognised public-interest bodies, whatever the price or purpose. The work is in classifying the buyer. Ministries and public authorities qualify without difficulty. State-owned commercial companies need a government direction or public-interest status before you can rely on the exemption.
Key takeaways
- Article 3(a)(4) exempts real estate transactions where the transferee is a public entity, public legal person, public-interest association, or a designated public-interest entity or project.
- It covers sales, not only gifts. ZATCA's Guideline confirms the exemption applies whatever the purchaser plans to use the property for, including commercial use.
- Ministries, departments, authorities and centres forming part of the government are expressly treated as public entities.
- Government-owned commercial companies are generally not public legal persons. Unless they hold public interest status or are covered by government guidance, a sale to them is taxable.
- The exemption follows the transferee and covers both direct and indirect interests, so a sale of shares in a real estate company to a qualifying body can also be exempt.
- The seller remains responsible for registering the transaction and should obtain evidence of the buyer's status before notarization.
Frequently asked questions
Do I pay RETT if I sell property to a government ministry in Saudi Arabia?
No. Article 3(a)(4) of the RETT Implementing Regulations exempts real estate transactions to a public entity. Any ministry, department, authority or centre forming part of the government counts as one. The exemption covers sales for full value, not just gifts, and the transaction must still be registered on ZATCA's portal.
Does the exemption apply if the government body will use the property commercially?
Yes. ZATCA's Guideline states that the exemption applies regardless of the purpose or use of the property. Its Example 22 confirms that a public authority's SAR 10,000,000 purchase of a commercial building, used to generate revenue, is exempt.
Is a sale to a government-owned company exempt from RETT?
Generally not. A company owned by the state, or by a state fund, is usually a commercial company rather than a 'public legal person'. Such a sale is exempt only if the company falls within another limb of Article 3(a)(4), for example where it holds public interest status or the government has directed the transfer for public-interest purposes.
Is a sale to a non-profit association exempt from RETT?
Yes, if the association's bylaws aim to fulfil the public interest under the Civil Society Associations and Organizations Law, or it has been granted public interest status by the competent authority. Unlike Article 3(a)(3), this exemption does not require the transfer to be free.
Who bears the RETT saving when selling to a government entity?
The seller (transferor) is legally responsible for RETT. As ZATCA's Guideline notes, purchasers often bear the cost commercially. The exemption removes the tax, so it benefits whichever party would otherwise have borne it. Make sure the sale price reflects that no RETT is due.
What evidence should a seller keep?
Keep a document identifying the transferee as a qualifying body: its establishing instrument, its public interest status certificate, or the government guidance directing the transfer. Keep it with the title documents and the ZATCA registration notice for at least five years.
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.
