RETT Exemptions in Saudi Arabia: The Complete Guide for Real Estate Transactions

Most people meet RETT the same way: a 5% line on a property transfer they assumed was straightforward. The instinct that follows is almost always the same — “surely this one is exempt.” Sometimes it is. Far more often, the transaction sits one condition away from being fully taxable, and the party who relied on the exemption only discovers this when ZATCA reassesses the deal two years later.

Saudi Arabia’s Real Estate Transaction Tax exemptions are not loopholes and they are not generous gestures. They are a tightly drafted set of carve-outs in Article 3 of the RETT Law and Article 3 of its Implementing Regulations, each with its own definition of who qualifies, what voids it, and what happens when a condition fails after the fact. This guide maps every one of them — and, just as importantly, shows you where the traps are.

The Exemption Architecture: Three Layers of Authority

RETT applies at 5% on the total value of any real estate transaction, regardless of the property’s status, form, or use, and whether or not it is notarized. That is the default. Everything in this guide is an exception to it.

The exemptions live across three sources, and you need all three to apply any of them correctly:

• The RETT Law (Royal Decree No. M/84): Article 3 sets out the categories of exempt transaction at the level of principle.
• The Implementing Regulations (Board Resolution No. 01-03-25, 24 March 2025): Article 3 of the Regulations supplies the criteria, controls, and conditions for each exemption — this is where the real work happens.
• The ZATCA Detailed RETT Guideline: Section 5 walks through each exemption with worked examples (Examples 16 to 62). ZATCA is bound by its own published guidance for periods after it is issued, which makes these examples unusually valuable.

One framing point that saves a lot of confusion: an exemption removes the tax, not the obligation to register. Article 3 of the Regulations is explicit — every exempt transaction must still be registered with ZATCA under the same procedures as a taxable one. The notary cannot complete the transfer without ZATCA first confirming the exemption. No registration, no transfer.

The Golden Rule: A Conditional Exemption Can Be Clawed Back

This is the single most important idea in the entire exemption regime, and it is the one that costs people the most money. Many RETT exemptions are conditional and continuing. They depend on something that must remain true for a defined period after the transaction — a share that must not be sold, an ownership percentage that must not change, a property that must not be re-gifted.

When one of those conditions later fails, the exemption does not just stop applying from that point. The original transaction becomes taxable, and RETT is calculated on that transaction’s value. The breach sets the timing: under Article 4(f) the tax is due by reference to the disposal that broke the conditions, and Article 5(A)(2) gives the taxpayer 30 days from the breach to pay. ZATCA’s Guideline v6 confirms both points in its due-date table.

ZATCA’s reach here is long. Under Article 8, it can demand the tax within three years of becoming aware of a transaction — but that three-year clock does not limit its right to chase tax where an exemption condition has been breached. In other words, the clawback risk effectively runs for as long as the underlying condition is meant to hold.

The Complete Map of RETT Exemptions

The Regulations and the ZATCA Guideline together set out more than twenty distinct exemption scenarios. They fall into recognisable families. The table below is your reference map; the sections that follow unpack each family in turn.

Three transitional exemptions also exist for transactions straddling the law change: pre-effective-date Ijara/finance-lease completions, transactions already subject to VAT before notarization, and a one-Hijri-year grace window for partners to notarize property already sitting in a company’s books. We cover these at the end of Section 09.

Family & Succession Exemptions

Three exemptions deal with property moving through a family — by death, by gift, and by will. They look similar and are constantly confused. They are not the same.

Inheritance (estate division)

The division and distribution of a deceased person’s estate is exempt — whether the property passes from the deceased to the heirs or is divided among the heirs themselves, within the limits of their legal shares per the inheritance certificate. The logic is that distributing an estate is not a sale.

The trap sits on the other side of the distribution. Once the estate is divided, any subsequent sale by an heir is fully taxable. And if the heirs sell the property before dividing it — to split the cash — that sale is taxable too. There is a subtler point in ZATCA’s Example 16: if one heir takes the house (worth more than their legal share) and compensates the other heirs in cash for the difference, that difference is treated as a taxable real estate transaction.

Notarized gift to a spouse or close relative

A notarized gift (Hibah) to a spouse or a relative up to the third degree is exempt — but it carries a three-year clawback that we devote an entire article to. The relative must genuinely be within the third degree (parents, children, siblings, grandparents, grandchildren, aunts, uncles, nieces, nephews). A cousin is not within the third degree, so a gift to a cousin is fully taxable (Example 27). And the transaction must be a true gift, not a sale dressed as one — selling to your father for SAR 1,000,000 is taxable, because it is a sale, not a Hibah (Example 28).

Notarized lawful will (bequest)

A transfer made in implementation of a notarized lawful will is exempt, provided the will is notarized. The distinction from a gift is timing: a gift takes effect in the donor’s lifetime; a bequest takes effect on death. Once the bequest is executed and the beneficiary later sells, that sale is taxable.

Public-Interest Exemptions

This family removes RETT where property serves the public good — but each carve-out has a precise boundary, and ZATCA polices the line between public-interest activity and ordinary commercial activity carefully.

Endowments (Waqf)

A transfer to a public, private, or joint endowment without consideration is exempt — provided the endowment is registered with the relevant authorities and under their supervision. Two limits matter. First, only the first transfer into the Waqf is covered; later dealings by the Waqf are not. Second, the transfer must be without consideration. Sell a building to an endowment for SAR 1,000,000 and it is fully taxable, because it is a sale (Example 18).

Licensed charitable organisations

Transfers to or from a legally licensed charitable organisation, again without consideration, are exempt. ZATCA’s Examples 19 and 20 draw the line cleanly: gifting land to a licensed charity is exempt, but when that charity then grants a 70-year usufruct over the land for SAR 100,000 a year, that onward transaction is taxable — the exemption only ever covered the first, gratuitous transfer.

Public entities and public-authority transfers

Transfers to a public entity, public legal person, or public-interest body are exempt regardless of the intended use of the property (Example 21). Transfers from a public entity are exempt only where the entity is acting in its capacity as a public authority — under a statutory mandate, not on commercial terms, and without competing with the private sector. Sell a villa through a public body’s investment programme and it is taxable at 5% (Example 24), because that is commercial activity, not public authority.

Expropriation

Where the State expropriates property for public benefit under the approved statutory procedure, the owner is exempt — even though compensation is paid. In Example 25, a property expropriated for road construction with SAR 800,000 compensation carries no RETT for the owner.

Corporate & Restructuring Exemptions

This is the most valuable family for businesses — and the most condition-heavy. The unifying theme is that the State will not tax property moving within a genuine corporate structure, provided the economic ownership does not really change for five years.

The exemptions here cover: an individual contributing property in-kind for shares (5-year retention plus audited financials); an individual transferring property to a company or fund they wholly own; transfers between commonly and wholly owned group entities; mergers; acquisitions; and transfers to a company wholly owned by an endowment. Every one of them carries a five-year retention condition — and breaching it triggers the clawback described in Section 02.

Mergers and acquisitions have their own additional gates — consideration must be shares only, ownership must be proportional, an acquisition must complete in a single transaction — which we examine in the dedicated M&A article. The key cross-cutting rule: a later transfer of those shares as part of a further qualifying merger or acquisition is not a breach, provided the chain keeps satisfying the same conditions.

Capital-Market & Investment-Fund Exemptions

Because interests in real estate companies and funds can themselves be taxable real estate transactions, the Regulations carve out genuine capital-market activity so that ordinary investing is not caught.

• IPO subscription to securities of a real estate company offered publicly.
• Trading of listed securities of a real estate company on a licensed Saudi market.
• Treasury shares — a listed joint-stock company buying back its own shares.
• Unlisted fund units, where the fund meets the real estate company definition — but only where the dealing represents less than 50% of the fund’s units. Cross 50% (alone or by concert) within any three-year window and the exemption falls away (Example 59 shows a 10% unit sale staying exempt).
• In-kind contribution to a REIT — exempt, but the corresponding units must be held until the fund terminates or for at least five years, whichever is earlier (Example 61).
• Fund–custodian transfers — temporary transfers between a fund and its custodian, common because funds often lack independent legal personality.

A useful relief built into the Regulations: a dilution of your holding purely because the company or fund went through an IPO does not count as a breach of a retention condition. Neither does a transfer compelled by a court forced-sale order, nor a transfer rolled into a further qualifying merger or acquisition.

Financing & Security Exemptions

Saudi real estate financing routinely moves legal title around without any real change of ownership. The Regulations recognise this.

A temporary transfer of property to a licensed financier as security or guarantee for financing or credit is exempt — provided ownership is not permanently transferred. The return leg, when the debt is repaid and title goes back to the owner, is also exempt. But if the borrower defaults and the financier keeps the property as recovery, the transfer becomes permanent and is taxable (Examples 31–32). The exemption even covers title moving between banks or to a refinancing company as part of debt-transfer operations under Ijara contracts (Examples 33–34).

Separately, the Regulations protect against double taxation: a single real estate transaction is taxed only once. This is what makes Murabaha and Ijara financing workable — the first transfer to the licensed financier is taxed, but the later transfer of the same property, same value, to the final beneficiary is not (Example 62). The implicit profit margin in the financing is never part of the RETT base.

Procedural, Developer & Transitional Exemptions

A final set of exemptions deal with timing, developers, and the change-over from the old regime.

Cancellation within 90 days

If the parties cancel a notarized transaction by mutual consent within 90 days, return the property unchanged, and refund the full value, the restitution is exempt (Example 57). Tax already paid can be reclaimed under the refund procedure.

Transfers to a licensed off-plan developer

A transfer to a developer licensed for off-plan (Wafi) sales is exempt where the property is allocated to a licensed off-plan project. If the licensing decision is not yet issued at the transaction date, the transferor gets a 90-day window to produce it — but must pay the tax or post a cash/bank guarantee in the meantime. License arrives in time: refund or release the guarantee. It does not: ZATCA keeps the guarantee as the tax.

Transitional exemptions (legacy transactions)

• Pre-effective Ijara/finance leases: ownership transfers completing now under finance-lease contracts concluded before RETT took effect are exempt (Example 35).
• Already subject to VAT: a transaction subject to VAT before notarization, notarized after the RETT Law took effect, is exempt to avoid double taxation (Example 40).
• Partner property in company books: where a partner transferred property into a company’s books before the law but never notarized it, a one-Hijri-year grace window allows notarization without RETT, on proof from audited statements (Examples 41–42).

The First-Home Support — Not an Article 3 Exemption

This is where precision matters. The widely cited “first home exemption” is not one of the Article 3 statutory exemptions. It is a separate State-borne support: under a joint mechanism between ZATCA and the Ministry of Municipalities and Housing, the State bears the RETT on the first SAR 1,000,000 of an eligible Saudi citizen’s first-home purchase. Any amount above SAR 1,000,000 is taxed at 5%.

The mechanics are also different. The buyer obtains a First Home certificate from the MoMRAH portal (housing.gov.sa) and gives it to the seller, who processes the transaction through the ZATCA portal. ZATCA verifies eligibility, exempts the first SAR 1,000,000, and charges 5% on the excess.

Common Misapplications That Cost Real Money

• Treating “for consideration” as exempt. The Waqf and charity exemptions only cover gratuitous transfers. A sale to an endowment or charity is fully taxable.
• Stretching the family circle. The gift exemption stops at the third degree. Cousins, in-laws, and friends do not qualify.
• Confusing a gift with a sale. The label on the contract does not save it — a sale to a first-degree relative is still a taxable sale.
• Forgetting the five-year clock. Restructuring, in-kind, and intra-group exemptions are conditional. Selling the shares early backdates the whole tax.
• Assuming the exemption covers downstream transfers. Public-interest and Waqf exemptions cover the first transfer only. What the recipient does next is its own transaction.
• Skipping registration. Exempt does not mean invisible. Unregistered exempt transactions cannot be notarized and leave you exposed on the burden of proof.

Worked Example — Reading the Conditions Correctly

Article-by-Article Guides to Every RETT Exemption

Each exemption in Article 3 of the RETT Implementing Regulations has its own guide below. Each one sets out the exact provision, how ZATCA reads it, worked examples in SAR and the grey areas.