In brief
Transferring shares in a Real Estate Company (≥50% real estate by FMV, including a 365-day lookback) is treated as a real estate transaction for RETT purposes.
RETT on Transfers in Real Estate Companies: The 30% Threshold Explained | Dariba.co
Why This Matters for Deal-Makers and Investors
The ability to sell a company rather than directly sell the underlying property is a well-known structuring consideration in real estate. In Saudi Arabia, the RETT Law closes this avenue for significant disposals of real-estate-heavy entities. Under the look-through regime established by Article 2 of the Implementing Regulations, transferring shares or interests in a Real Estate Company can be a taxable RETT event — assessed not on the share value, but on the underlying real estate.
This is commercially material. A company holding SAR 100 million in Saudi real estate and SAR 20 million in cash would be a Real Estate Company. A disposal of 35% of its shares would trigger RETT of SAR 5,250,000 (5% × SAR 100 million × 35%). M&A advisors, PE fund managers, family offices, and legal counsel structuring Saudi real estate transactions must build this analysis in at the outset of any deal.
The Two-Part Test: Step One — Is It a Real Estate Company?
The first question is whether the entity in question qualifies as a “Real Estate Company” for RETT purposes. The definition applies to any company, fund, or entity (regardless of its legal form or stated purpose) that:
- Directly or indirectly owns real estate situated in the Kingdom of Saudi Arabia
- With the aim of generating revenue from that real estate by selling or leasing it
- Where the total fair market value of such real estate is not less than 50% of the total fair market value of the entity’s assets — assessed on the date of the interest transfer, or at any time during the 365 days preceding that date
The 365-day lookback is intentional anti-avoidance. A company cannot temporarily shift its asset mix below the 50% threshold immediately before a planned disposal and then revert. If the threshold was crossed at any point in the preceding year, the entity qualifies as a Real Estate Company for that transaction.
Step Two — Does the Disposal Reach 30%?
Even if an entity qualifies as a Real Estate Company, not every share transfer triggers RETT. A taxable event arises when a person, or a group of persons acting in agreement, dispose of a total of 30% or more of the company’s interests, through one or more related transactions, within any three-year rolling period.
The three-year window starts from or after the date on which the cumulative holding of the person (or concert group) reaches 30% or more. Transfers below 30% that do not, in aggregate, push the cumulative disposal over the threshold in any three-year window are not taxable RETT events.
The “concert” or “agreed disposal” concept extends the aggregation beyond a single person. Related persons are deemed to act in concert unless proven otherwise. If multiple shareholders coordinate their sales — even informally — their combined disposals are aggregated for the 30% threshold test.
How RETT Is Calculated on a Share Transfer
Once the two-part test is met, RETT is calculated on the fair market value of all real estate owned directly or indirectly by the company at the time of the transaction — multiplied by the percentage of interests transferred. If the value agreed between the parties and allocated to the real estate is higher than the FMV-based figure, RETT is assessed on that higher value.
| Variable | Details |
|---|---|
| Tax base | FMV of all Saudi real estate owned by the company (directly + indirectly) |
| Multiplier | Percentage of interests transferred (e.g. 35%) |
| Rate | 5% |
| Assignor | The person(s) disposing of the shares — they bear the RETT |
| Payment deadline | Within 30 days of the earlier of: (a) date of share transfer, or (b) date of unconditional agreement to transfer |
Listed Securities Exception
The transfer of shares, interests, or units listed on a licensed Saudi capital market in a Real Estate Company is expressly exempt from RETT under Article 3 of the RETT Law and Implementing Regulations. This covers public offerings, secondary market trading, share buybacks by listed companies, and the trading of unlisted investment fund units — subject to one exception.
For unlisted investment fund units: if a person or concert group disposes of 50% or more of the fund’s units in a three-year window, the exemption falls away and RETT applies. This is a higher threshold (50%, not 30%) that reflects the unique structure of unlisted real estate investment funds.
Key takeaways
- Transferring shares in a Real Estate Company (≥50% real estate by FMV, including a 365-day lookback) is treated as a real estate transaction for RETT purposes.
- A taxable event arises when a person or concert group disposes of 30%+ of the company's interests within any three-year rolling period.
- The tax base is the FMV of all Saudi real estate owned by the company × the percentage transferred × 5%.
- Payment is due within 30 days of the earlier of: the transfer date, or the date of the unconditional agreement to transfer.
- Listed securities on licensed Saudi exchanges are exempt. Unlisted fund unit transfers trigger RETT if 50%+ is disposed of in three years.
- Concert group aggregation means coordinated multi-party disposals must be tracked cumulatively — even if no single party individually reaches 30%.
Frequently asked questions
Our company holds a warehouse (SAR 30M) and a large cash balance (SAR 25M) and equipment (SAR 10M). Is it a Real Estate Company?
Total assets: SAR 65M. Real estate: SAR 30M = 46.2% of total. This is below the 50% threshold — so at this snapshot, it would not qualify. However, the 365-day lookback applies. If at any point in the preceding 12 months the real estate FMV was ≥50% of total assets (for example, if cash was lower), the company qualifies. A time-series asset valuation is needed to confirm the position.
A private equity fund is buying 25% of a Saudi Real Estate Company. Does RETT apply?
A single acquisition of 25% does not by itself trigger RETT — the threshold is 30%. However, if the seller had prior disposals within the three-year window that, combined with this 25% transfer, exceed 30%, RETT applies on the aggregate. Additionally, if the PE fund plans further acquisitions, they need to track whether the cumulative total from date of first disposal reaches 30%.
When exactly is the 30-day RETT payment deadline for a share transfer?
RETT must be paid within 30 days from the earlier of: (a) the date the shares are actually transferred, or (b) the date on which an unconditional agreement to transfer the shares is concluded. If the SPA is signed unconditionally on 1 January and completion occurs on 1 March, the 30-day clock starts from 1 January — not completion. This is particularly relevant for deals with a gap between signing and closing.
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.
