In brief
The total value of a real estate transaction is the value of all agreed consideration, cash or in kind, connected with the transaction, provided it is within fair market value limits, subject to the special cases in Article 2. In practice, RETT is charged on the higher of the agreed consideration and fair market value.
The rate is fixed at 5%, so the dispute in most RETT cases is about the value. Article 2(c) sets the basic rule: everything the buyer gives, within fair market value limits.
The Provision: Exact Text
What It Means in Plain English
RETT is charged on the full price, including anything given in kind, and that price must be in line with fair market value. If you agree a price below market, ZATCA can tax the market value instead.
Breaking Down the Provision
“Any consideration, whether cash or in kind”
| Consideration | Included? |
|---|---|
| Cash price | Yes |
| Debt or mortgage taken over by the buyer | Yes (in kind) |
| Property given in exchange (swap) | Yes, at fair market value |
| Shares issued to the seller | Yes, unless an exemption applies (e.g. Article 3(a)(11)) |
| Services or other benefits given to the seller | Yes |
| Implicit profit in licensed financing | No (ZATCA Example 9) |
“Agreed upon in connection with the real estate transaction”
Side payments, consultancy fees and deferred amounts linked to the transaction are part of the consideration. Under Article 6, disguised amounts are added back.
“Within the limits of the fair market value”
ZATCA defines fair market value as the price between two independent parties in an open market for a similar transaction, or according to approved real estate indices. In practice, the base is the higher of the agreed consideration and fair market value. Article 8 provides the procedure, including your right to submit an accredited valuation.
“Considering any specific cases stipulated in this Article”
Special rules override the general rule for:
- share transfers in real estate companies (2(e));
- usufructs over 50 years (2(f));
- BOOT projects (2(g)).
ZATCA’s Position
- Example 8: land is sold for SAR 1,000,000 between relatives, against a fair market value of SAR 1,500,000. RETT is charged on SAR 1,500,000.
- Example 9: a SAR 1,000,000 home is bank-financed, with SAR 400,000 of financing cost. RETT is charged on SAR 1,000,000.
Worked Examples
Example 1: Debt assumption
A buyer pays SAR 2,000,000 in cash and takes over the seller’s SAR 1,500,000 mortgage. Base: SAR 3,500,000. RETT: SAR 175,000.
Example 2: Land swap
A owns a plot worth SAR 4,000,000. B owns one worth SAR 3,500,000 and pays SAR 500,000 to balance. Two taxable transactions:
- A to B: consideration SAR 3,500,000 plot plus SAR 500,000 cash = SAR 4,000,000. RETT SAR 200,000.
- B to A: consideration is A’s plot, at SAR 4,000,000 market value minus the SAR 500,000 B paid, which equals B’s plot at SAR 3,500,000. RETT SAR 175,000.
Example 3: Price above market
A buyer pays SAR 6,000,000 for a property worth SAR 5,000,000 for strategic reasons. RETT is charged on the agreed SAR 6,000,000. Fair market value is a floor, not a ceiling.
Common Mistakes
- Declaring only the cash price and leaving out debt taken over or swapped assets.
- Related-party discounts without a valuation.
- Including financing profit and overpaying.
The Bottom Line
Article 2(c) charges RETT on everything the buyer gives, with fair market value as the minimum. Declare all consideration, support related-party prices with a valuation, and leave financing profit out of the base.
Key takeaways
- The RETT base is the total consideration agreed for the transaction, both cash and in kind.
- In-kind consideration includes property swaps, shares, debt taken over by the buyer, and services.
- The base must be within fair market value limits. A below-market price can be lifted to fair market value under Article 8.
- ZATCA defines fair market value as the price between independent parties for a similar transaction, or as per approved real estate indices.
- The implicit profit margin in licensed financing, such as murabaha or ijarah profit, is not part of the base (ZATCA Example 9).
- Special valuation rules apply to share transfers (2(e)), usufructs over 50 years (2(f)) and BOOT projects (2(g)).
Frequently asked questions
What value is RETT calculated on?
On the total value of all cash or in-kind consideration agreed for the transaction, provided it is within fair market value limits (Article 2(c) of the RETT Implementing Regulations). If the agreed price is below fair market value, ZATCA can assess RETT on fair market value.
Is RETT calculated on the price including financing costs?
No. ZATCA's Guideline, Example 9, confirms that the financing cost added to instalments in a bank-financed purchase is excluded. RETT is charged on the property's value, for example SAR 1,000,000, not the SAR 1,400,000 total repaid.
How is RETT calculated on a property swap?
Each side of a swap is a real estate transaction. Each transferor's consideration is the property received, valued at fair market value. Any cash balancing payment is added for the party receiving it.
Can I sell property to a relative at a low price?
You can agree any price, but RETT is charged on at least fair market value. ZATCA's Example 8 taxes a SAR 1,000,000 sale between relatives on the SAR 1,500,000 market value. If you want to transfer value within the family, a documented gift to a qualifying relative is exempt under Article 3(a)(7).
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.
