In brief
Article 1 of the RETT Implementing Regulations adopts the definitions in Article 1 of the RETT Law and adds its own: Custodian, Representative, Correction Request, Due Tax, Related Persons, Securities, Shares, Merger, Acquisition, Related Transactions, Agreed Disposal and Relatives up to the Third Degree. Several of them, especially Related Persons, Agreed Disposal and Acquisition, decide whether exemptions apply and whether share transfers cross the 30% threshold.
Article 1 looks like a glossary, but it is where several of the most important RETT outcomes are decided. Whether a share sale crosses the 30% threshold depends on the definitions of “Related Persons” and “Agreed Disposal”. Whether a share-for-share deal is exempt depends on “Acquisition”. Whether a family gift is exempt depends on “Relatives up to the Third Degree”.
The Provision: Exact Text
What It Means in Plain English
The RETT definitions in Article 1 sit on top of the RETT Law’s own definitions. The ones that matter most in practice are these: related persons are defined using the income tax and transfer pricing tests; related persons are assumed to be acting together when they sell shares; an “acquisition” only qualifies for the exemption if it takes 100% of a real estate company between companies; and the gift exemption’s family circle stops at uncles, aunts, nephews and nieces.
The Definitions That Matter Most
Representative
This defines who can act for the transferor before ZATCA: guardians, trustees, waqf administrators, liquidators and corporate officers, among others. It works alongside Article 11(g), which applies the registration and record-keeping obligations to representatives.
Related Persons
The definition borrows the Income Tax Law Article 64 and Transfer Pricing Bylaws tests, which cover ownership or control links (generally 50% or more under the TP Bylaws) and common control. It matters in three places:
- Article 8(A)(1): related-party transactions are the first trigger for ZATCA to verify value.
- “Agreed Disposal”: related persons are presumed to act together.
- Article 2(i) and Article 3(a)(9)(d): combined disposals by related persons count together towards the 30% (company) and 50% (fund) thresholds.
Shares and Securities
“Shares” means ownership interests in properties, legal persons or any partnership. That is deliberately wide: it covers LLC quotas, partnership interests and undivided interests. “Securities” follows the Capital Market Law and includes fund units.
Merger and Acquisition
These define the scope of the Article 3(a)(16) exemption:
- Merger: one or more legal persons merging into another, or forming a new one, under the Kingdom’s merger provisions. Cross-border mergers under foreign law may fall outside this.
- Acquisition: a share exchange that acquires the entire shares of a real estate company, with legal persons on both sides. Partial deals and acquisitions from individuals are excluded.
Related Transactions and Agreed Disposal
Together, these stop a controlling stake from being sold in pieces to stay under the threshold:
- Related Transactions: several transfers forming part of one agreement or a series, or made by persons acting by agreement.
- Agreed Disposal: any cooperation, binding or not, formal or informal, aimed at disposing of shares. Related persons are presumed to act in agreement unless proven otherwise.
Relatives up to the Third Degree
This sets the circle for the gift exemption in Article 3(a)(7). Spouses are named separately in that exemption. Cousins, in-laws and step-relatives are outside the list.
Worked Example: The Agreed Disposal Presumption
Three brothers each own 12% of a real estate company. Within 18 months, each sells his 12% to the same buyer.
- None of them alone holds or sells 30%.
- The brothers are related persons, so they are presumed to be acting in agreement. Together they held 36% and disposed of 36% within three years.
- The disposals are related transactions, so the 30% threshold in Article 2(i) is met and RETT applies, unless the brothers can prove they acted independently.
Grey Areas
| Situation | Our view |
|---|---|
| Unrelated co-investors selling under a drag-along or tag-along clause | A shareholders’ agreement coordinating disposals is an “agreement”, so it is likely an agreed disposal. |
| Rebutting the related-person presumption | Requires evidence of genuinely independent decisions: separate negotiations, different buyers, different timing. |
| Family members related by marriage | Whether they are “related persons” depends on the Income Tax Law and TP Bylaws tests. They are outside the gift exemption’s relatives list. |
Common Mistakes
- Assuming each shareholder’s sale is assessed separately. Related persons are aggregated by default.
- Calling any share deal an “acquisition”. The definition requires 100% of the target and legal persons on both sides.
- Treating cousins or in-laws as qualifying relatives for the gift exemption.
The Bottom Line
Article 1 decides who is grouped together, who is related and which deals qualify. Before applying any RETT rule, test the facts against these definitions first.
Key takeaways
- The Regulations use the RETT Law's own definitions and add twelve more of their own.
- 'Related Persons' borrows the Income Tax Law (Article 64) and Transfer Pricing Bylaws tests, so transfer pricing concepts now affect RETT.
- Related persons are presumed to act in agreement unless proven otherwise, and that presumption feeds into the 30% share-transfer rule and the 50% fund-unit rule.
- 'Acquisition' is narrow: a share exchange that acquires the entire shares of a real estate company, with legal persons on both sides.
- 'Shares' covers ownership interests in properties, legal persons and any partnership, which is wider than corporate shares.
- 'Relatives up to the Third Degree' fixes the family circle for the gift exemption. Cousins and in-laws are outside it.
Frequently asked questions
Who are 'related persons' for RETT purposes?
Anyone who is a related party or under common control under Article 64 of the Income Tax Law and the Transfer Pricing Bylaws (Resolution 6-1-19), as amended or replaced. Article 1 of the RETT Implementing Regulations adopts those tests by reference.
What does 'acting in agreement' mean under RETT?
The Regulations define 'Agreed Disposal' as cooperation under any agreement or understanding, binding or not, formal or informal, between persons aiming to dispose of shares in a real estate company. Related persons are deemed to act in agreement unless they prove otherwise.
Who counts as a representative for RETT?
Any person who, under Sharia or law, has the right to represent the transferor before ZATCA. This includes trustees, guardians, endowment administrators, judicial guardians, liquidators, bankruptcy trustees, a company's representative under its articles or bylaws, and any legal person's representative under its governing rules.
Which relatives are within the third degree?
First degree: father, mother, son, daughter. Second degree: brother, sister, grandparents, grandchildren. Third degree: uncles, aunts, nephews and nieces. Cousins and in-laws are not included.
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.
