In brief
For RETT, movable property that an owner places in real estate they own is treated as real estate if it is intended for the permanent service or exploitation of that real estate, even if it is not permanently attached. Its value forms part of the taxable transaction.
A common way to reduce RETT on an operating asset is to allocate part of the price to furniture, fittings and equipment. Article 2(b) limits that approach. It follows the civil-law concept of immeuble par destination: movables dedicated to a property’s use are treated as part of the property.
The Provision: Exact Text
What It Means in Plain English
For RETT, movable property and fixtures are treated as real estate when the owner puts them in their own building to serve or run it on a lasting basis, whether or not they are bolted down. Their value is part of the 5% base when the property is sold.
Breaking Down the Provision
Three conditions must all be met:
- Placed by its owner in real estate they own. The owner of the movables and the owner of the property are the same person.
- Intended for the permanent service or exploitation of the property. The items serve the property’s function, not a separate business.
- Not necessarily affixed. Attachment is not required.
ZATCA’s Guideline definition of “real estate” separately includes fixtures and equipment that form a fixed part of, or are permanently attached to, a building. Article 2(b) extends that to unattached items dedicated to the property.
Typical Classification
| Item | Likely treatment |
|---|---|
| Hotel furniture, beds, kitchen equipment | Deemed real estate (serves the property’s operation as a hotel) |
| Chillers, generators, lifts, building management systems | Real estate (attached and dedicated) |
| Factory production line installed for the plant | Likely deemed real estate if dedicated to the factory’s operation |
| Hospital fixed medical gas systems | Real estate |
| Office laptops, vehicles, inventory | Not real estate. These are business assets |
| Tenant’s own fit-out equipment | Not covered by 2(b), because it was not placed by the owner |
Worked Example
A hotel is sold for SAR 120,000,000. The SPA allocates SAR 100,000,000 to the building and SAR 20,000,000 to “FF&E” (furniture, fixtures and equipment).
- The FF&E was placed by the owner to operate the hotel, so under Article 2(b) it is deemed real estate.
- The RETT base is SAR 120,000,000, giving RETT of SAR 6,000,000, not SAR 5,000,000.
- If SAR 2,000,000 of the allocation relates to vehicles and consumable stock, those can properly be excluded with documented valuations, giving a base of SAR 118,000,000.
Grey Areas
| Situation | Our view |
|---|---|
| Specialised machinery that could be moved and used elsewhere | The test is intended use for this property, not portability. If it is dedicated to the plant, treat it as real estate. |
| Equipment owned by an affiliate of the property owner | Not “placed by its owner”. It may fall outside 2(b), but ZATCA could look at substance under Article 6. |
| Going-concern sale with goodwill | Goodwill is not real estate. Allocate it on a supportable valuation. Expect scrutiny under Article 8(A)(2). |
Common Mistakes
- Excluding FF&E from the base by allocation alone.
- Including true business assets (stock, vehicles) and overpaying.
- Not having a valuation to support the split.
The Bottom Line
Article 2(b) puts property-dedicated movables into the RETT base. In hotel, hospital and industrial transactions, classify each asset class against the owner-placed and permanent-use test, and document the allocation before signing.
Key takeaways
- Article 2(b) treats movables as real estate where the owner places them in their own property for its permanent service or exploitation.
- Physical attachment is not required. Intended permanence of use is the test.
- Typical examples: hotel furniture and equipment, factory production lines, building plant, hospital fixtures, fitted kitchens.
- Such items are part of the RETT base. Allocating part of the price to 'equipment' does not take that part out of RETT.
- Items brought in by a tenant, or used for a separate business rather than to serve the property, fall outside the test.
- ZATCA can verify allocations under Article 8(A)(2) where consideration is split between real estate and other assets.
Frequently asked questions
Is furniture included in RETT when selling a hotel?
Generally yes. Article 2(b) of the RETT Implementing Regulations treats movables placed by the owner in their own property for its permanent service or exploitation as real estate, even if they are not fixed. Hotel furniture and operating equipment typically meet that test, so their value is part of the 5% base.
Can I split the price between the building and the equipment to reduce RETT?
Not for items within Article 2(b). They are deemed real estate, so their value is taxed with the property. ZATCA can also verify any allocation where consideration is split between real estate and other assets (Article 8(A)(2)).
Are a tenant's fixtures included?
The rule covers movables placed by the owner in real estate the owner owns. Items installed by a tenant and remaining the tenant's property do not meet that test, although tenant improvements that become part of the building may be real estate in their own right.
What about vehicles or stock in a factory sale?
Vehicles, raw materials and finished goods are not placed for the permanent service of the real estate. They are business assets and fall outside Article 2(b). Allocate them separately on a defensible basis.
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.
