In brief
A real estate transaction is taxed only once where the parties, the property and the value are the same. This includes transfers under murabaha and ijarah-to-own and finance lease contracts. The first transfer to the licensed financier is taxed, both transfers are specified in the financing contracts with their parties, property and value, and the property's description and value do not change. The final transfer to the customer is then not taxed again.
Most Saudi homes bought with finance are bought through murabaha or ijarah. The bank buys the property, then sells or leases it to the customer, and title eventually passes to the customer. That is two legal transfers for one economic purchase. Article 2(l) ensures RETT is charged once.
The Provision: Exact Text
What It Means in Plain English
On RETT, murabaha and ijarah: when a bank buys a home in order to finance a customer, RETT is paid once, on the purchase from the seller. When the bank later transfers the home to the customer under the same financing, there is no second RETT, as long as the contracts named both transfers and nothing changed.
Breaking Down the Provision
The general principle
The taxed-once rule needs three things to be the same:
- parties (no substitution or amendment);
- property (no change to the real estate); and
- value (no change to the value).
If any of these changes, ZATCA treats the later transfer as a new transaction.
The three financing conditions
- First transfer taxed. Seller to licensed financier, under the normal rules.
- Both transfers documented. The financing contracts identify the parties to the first and later transfers, the property and the value.
- No change. The description and value stay as stated in the contracts.
ZATCA’s Position
- Example 6: a customer buys a SAR 1,000,000 apartment under a finance lease. The bank buys it and pays the tax. At the end of the term, ownership passes to the customer with no new tax.
- Example 9: the financing cost of SAR 400,000 is not part of the base. RETT is charged on SAR 1,000,000.
- Example 62: under ijarah, the developer paid RETT on the first transfer in 2020. The 2030 transfer to the customer is not taxed again.
Worked Example
A family buys a villa for SAR 2,500,000 through ijarah. The bank buys it from the developer: RETT is SAR 125,000, paid on the first transfer and often passed on to the buyer. Over 20 years the family pays SAR 3,600,000 in instalments. At maturity, title passes to the family with no RETT.
If, partway through, the family moves the ijarah to another bank, the bank-to-bank transfer of title is covered by Article 3(a)(14) as a security transfer.
Grey Areas
| Situation | Our view |
|---|---|
| Customer changes during the financing (assignment to a relative) | A change of parties, so the final transfer is likely a new taxable transaction unless another exemption applies (e.g. a gift to a relative). |
| Early settlement and earlier title transfer | Parties, property and value are unchanged, so it should still be taxed once. |
| Value amended through restructuring the financing | Condition 3 risk. Document that the property value is unchanged even if the financing terms change. |
Common Mistakes
- Paying RETT again on the final transfer to the customer.
- Including financing profit in the base.
- Not documenting both transfers in the financing contracts.
The Bottom Line
Article 2(l) keeps Islamic finance on the same footing as a direct purchase: one property purchase, one RETT charge, on the property’s value and not the financing cost. The protection depends on the financing contracts identifying both transfers and on nothing changing in between.
Key takeaways
- Article 2(l) sets a taxed-once principle where the parties, the property and the value are all the same.
- In murabaha, ijarah-to-own and finance leases, the first transfer from the seller to the licensed financier is taxed.
- The second transfer, from financier to customer, is not taxed again if the financing contracts specify both transfers, their parties, the property and the value.
- The property's description and value must not change from those in the financing contracts.
- The financier's implicit profit margin is not part of the RETT value (ZATCA Example 9).
- Moving the financing to another bank is covered separately by Article 3(a)(14), the security transfer exemption.
Frequently asked questions
Is RETT paid twice on Islamic home finance?
No. Under Article 2(l) of the RETT Implementing Regulations, RETT is paid on the first transfer from the seller to the licensed financing entity. The later transfer from the bank to the customer is not taxed again, provided both transfers, the parties, the property and the value are specified in the financing contracts and nothing changes.
Is RETT charged on the bank's profit in murabaha or ijarah?
No. ZATCA's Guideline, Example 9, confirms that the financing cost added to instalments is excluded. RETT is charged on the property value, for example SAR 1,000,000, not the total repaid.
Who pays RETT in an ijarah home purchase?
The seller, as transferor of the first transfer to the bank, is liable. Commercially, the cost is often passed on. ZATCA's Example 62 notes the developer paying RETT on the first transfer.
What if the property or value changes during the financing?
Condition 3 requires the description and value in the financing contracts not to change. If they do, the final transfer may be treated as a new taxable transaction. ZATCA's Guideline says a change in parties, property or value makes it a new transaction.
Sources
- ZATCA — Real Estate Transaction Tax Law and Implementing Regulations
- ZATCA — Detailed Guideline for the Real Estate Transaction Tax (Version 6, May 2026)Sections 3.4 and 5.2; Examples 6, 9 and 62
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.
