In brief
Distribution of a deceased estate to heirs within their legal shares is exempt from RETT — but registration with ZATCA and an exemption certificate are still required before notarization.
RETT on Inheritance and Estate Distribution in Saudi Arabia | Dariba.co
The Inheritance Exemption: What It Covers
The distribution of a deceased estate to heirs according to their legal shares under Islamic inheritance law is exempt from RETT. This is Article 3(1) of the RETT Implementing Regulations, and the rationale is clear: distributing an estate among heirs within their entitlements is not a “transfer” in any meaningful commercial sense — it is the legal recognition of ownership rights that arose upon death.
The exemption covers real estate transactions resulting from the division of a deceased person’s estate, whether from the deceased to the heirs, or among the heirs themselves — provided the distribution is within the limits of each heir’s legal share as confirmed by the inheritance certificate (wathiqat al-wuratha).
Critically, the real estate must still be registered with ZATCA through the RETT portal and exemption documentation obtained before the Notary Public will process the transfer without RETT payment. Exemption from RETT does not mean exemption from registration.
The Boundaries of the Exemption
The inheritance exemption is limited to the division and distribution itself — it does not extend to any transactions that occur before or after the estate distribution that fall outside those legal shares.
- Sale before distribution: If heirs sell estate real estate before distributing it among themselves — for example, selling the deceased’s house to raise cash to divide — that sale is fully taxable at 5% RETT. The property has not yet been allocated to its heirs; a sale of undistributed estate property is a commercial disposal.
- Sale after distribution: Once an heir receives their allocated portion through the distribution, any subsequent sale of that inherited property is a standard taxable RETT event at 5%.
- Sale between heirs of their shares: If one heir wishes to buy out another heir’s share of the estate, that is a taxable sale — not a distribution. RETT at 5% applies to the value of the share transferred.
Worked Example — Estate Distribution with Compensation
The ZATCA Registration Process for Inheritance Transfers
Even where the inheritance distribution is fully exempt, the transaction must be registered with ZATCA. The process:
- The heirs (or their representative) access the RETT service on the ZATCA portal.
- The inheritance certificate (issued by the competent authority confirming the heirs and their legal shares) must be available.
- Transaction details are entered — the real estate, the parties, the nature of the transaction (estate division), and the declared value.
- ZATCA issues an exemption confirmation — this confirmation is presented to the Notary Public to allow the title transfer to proceed without RETT payment.
- The exemption documentation and all related records must be retained for five years.
Key takeaways
- Distribution of a deceased estate to heirs within their legal shares is exempt from RETT — but registration with ZATCA and an exemption certificate are still required before notarization.
- The exemption does not cover sales before distribution, sales after distribution, or buyouts between heirs.
- Where an heir takes an asset worth more than their legal share and compensates the others, the compensation amount is a taxable RETT disposal at 5%.
- Bequests (wills) to non-heirs are taxable events — they are not covered by the inheritance exemption.
Frequently asked questions
Our father passed away two years ago. We never formally distributed the estate. Is there a RETT liability for the distribution now?
No — the estate distribution itself is exempt regardless of when it occurs after death, provided it is within the heirs' legal shares. Delay does not create a RETT liability on the distribution. You must still register the transaction with ZATCA and obtain exemption documentation. If you decide to sell the property before distributing it, that sale would be taxable at 5%.
Two heirs want to keep the property jointly; one heir wants his cash equivalent. How is this treated?
The two heirs retaining their shares as co-owners are simply continuing their inherited ownership — no new taxable event for them. The heir who exits by receiving cash in exchange for his inheritance share is participating in a taxable disposal. The remaining two heirs (who are acquiring the exiting heir's share) are the effective buyers. RETT applies on the value of the exiting heir's share at 5%. The exiting heir as assignor bears the RETT obligation.
Is a bequest (wasiyya) to a non-heir treated the same as an inheritance distribution?
No. A documented legal will (wasiyya) transferring real estate to a non-heir is a taxable event under the RETT Law. The specific inheritance exemption covers distribution within legal inheritance shares — it does not extend to testamentary bequests to persons outside the legal heirs. A bequest to a non-heir is a separate taxable event at 5% of FMV.
Sources
Grounded in the RETT Law (Royal Decree No. M/84, effective 10 April 2025), Implementing Regulations (ZATCA Board Resolution No. 01-03-25, 24 March 2025), and ZATCA's Detailed Guideline Version 6 (May 2026). For informational purposes only. dariba.co is an independent knowledge platform.
