In brief
Where a taxable transaction grants the right to use real estate for more than 50 years, RETT is calculated on the present value of the fair market value of that right at the date of disposal, or the present value of the total agreed consideration, whichever is higher. If the consideration is later amended, the tax must be recalculated and a correction request filed under Article 11.
Long ground leases are common in Saudi development: land for hotels, logistics parks and master-planned communities. RETT treats a right of use beyond 50 years as equivalent to ownership. Article 2(f) explains how to value it.
The Provision: Exact Text
What It Means in Plain English
For RETT on a usufruct over 50 years, you take the present value of the right’s market value and the present value of all the rent agreed, and charge 5% on whichever is higher. The date of grant is the tax date. If the rent changes later, you recalculate and file a correction.
Breaking Down the Provision
“For a period exceeding fifty (50) years”
Strictly more than 50. A 50-year term is outside the rule. Renewal rights, automatic extensions and linked leases should be assessed together. Where the documents are designed to keep the term just under 50 years while the real arrangement is longer, Article 6 can apply.
Two present values, take the higher
| Measure | What it is |
|---|---|
| PV of FMV of the right | What an independent party would pay for the right to use, discounted to the grant date |
| PV of total agreed consideration | All rent or premium payable over the term, discounted to the grant date |
The text says “current value”, which means present value. ZATCA’s Example 10 (60 years, agreed rent SAR 100,000 a year, market rent SAR 200,000 a year) takes the higher market measure but computes the base as SAR 12,000,000, the undiscounted total. The discount rate and method are not prescribed. This is an area where documentation matters, and a ruling may be worth obtaining for large transactions.
Amendments after the grant
If the consideration changes, for example through rent reviews or renegotiation, recalculate. If the tax changes, file a correction request under Article 11(b): pay any increase, or claim a refund of any decrease under Article 9.
Worked Example
A landowner grants a developer a 75-year usufruct at SAR 2,000,000 a year, plus an upfront premium of SAR 10,000,000. An accredited valuer puts the right’s fair market value at a present value of SAR 48,000,000.
- PV of the consideration (premium plus rents, discounted at the valuer’s 7%) ≈ SAR 10,000,000 + SAR 28,300,000 = SAR 38,300,000.
- The higher measure is the FMV: SAR 48,000,000. RETT is SAR 2,400,000, payable within 30 days of the grant.
- If ZATCA instead followed the undiscounted approach in its example, the consideration total would be SAR 160,000,000 and RETT SAR 8,000,000. That gap shows why the discounting question matters.
Grey Areas
| Situation | Our view |
|---|---|
| Discount rate | Not prescribed. Use a valuer-supported, market-based rate and keep the analysis. |
| Rent indexed to inflation or turnover | Estimate the expected consideration. Recalculate when actual amounts differ significantly. |
| Grant cancelled on day 25 | No taxable transaction (Article 4(b)). |
Common Mistakes
- Treating long leases as outside RETT because they are called “leases”.
- Using the agreed rent only, ignoring a higher market value.
- Forgetting the correction duty when rent is renegotiated.
The Bottom Line
Article 2(f) treats rights of use beyond 50 years as ownership for RETT and values them on the higher of market value and agreed rent, in present-value terms. The discounting approach is not yet settled, so obtain an accredited valuation, document the rate, and recalculate whenever the rent changes.
Key takeaways
- A right to use real estate for more than 50 years is a taxable real estate transaction. Exactly 50 years or less is not.
- The base is the higher of the present value of the right's fair market value, or the present value of the total agreed consideration, at the date of grant.
- The tax falls due on the date the right is granted, with 30 days to pay, unless the grant is cancelled within 30 days (Articles 4(b) and 5(B)).
- If the agreed consideration is later amended, upward or downward, the tax must be recalculated and a correction request filed.
- ZATCA's Example 10 applies the higher fair market value but uses an undiscounted total. The discounting method is not specified, so document the rate you use.
- Renewal options and back-to-back leases can be combined to reach the 50-year test. Article 6 applies to artificial structures.
Frequently asked questions
Is RETT due on a long-term lease in Saudi Arabia?
Yes, if it grants the right to use real estate for more than 50 years. Article 2(f) of the RETT Implementing Regulations taxes it on the higher of the present value of the right's fair market value or the present value of the total agreed consideration. Leases of 50 years or less are outside RETT.
When is RETT payable on a usufruct over 50 years?
The transaction date is the date the right is granted, unless it is cancelled within 30 days (Article 4(b)). Because such grants are not usually notarized, tax is payable within 30 days of that date (Article 5(B)).
What if the rent is changed after the usufruct is granted?
The tax must be recalculated, and a correction request filed if the result increases or decreases the tax due, following Article 11 (Article 2(f)). Additional tax is payable, or the excess can be refunded under Article 9.
What discount rate is used for present value?
The Regulations do not specify one. ZATCA's Guideline Example 10 computes the base on an undiscounted total (SAR 200,000 a year for 60 years = SAR 12,000,000). Until ZATCA clarifies, document a supportable valuation and consider seeking a ruling for large transactions.
Sources
- ZATCA — Real Estate Transaction Tax Law and Implementing Regulations
- ZATCA — Detailed Guideline for the Real Estate Transaction Tax (Version 6, May 2026)Section 4.2 (Second) and Examples 10–11
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.
