Who Pays RETT in Saudi Arabia? Assignor Obligations and Liability

RETT liability in Saudi Arabia is clear on one thing: the transferor — the person disposing of the real estate — is primarily responsible for paying RETT to ZATCA. This is grounded in Article 7 of the RETT Law and the Implementing Regulations. There is no ambiguity in the statute, and ZATCA’s administrative practice reflects it consistently.

In a standard property sale, the transferor is the seller. In a gift, it is the donor. In a corporate restructuring, it is the entity or individual transferring the real estate. In a court-ordered disposal, it is the party whose asset is being transferred. The nature of the transaction does not change the fundamental rule: the person giving up the real estate bears the RETT obligation.

This has a practical implication that catches many parties off guard. RETT is a cost of disposal, not a cost of acquisition. Sellers — including corporate sellers and developers — must factor the 5% RETT cost into their transaction pricing from the outset. It comes off the proceeds, not from a cost the buyer separately settles with the government.

Under Article 11(a) of the Implementing Regulations, the transferor must also be the one to register the transaction on ZATCA’s electronic portal, generate the payment invoice, and settle it. The notarization process cannot proceed until this is done.

Commercial practice frequently results in the parties agreeing, in the sale and purchase agreement, that the buyer will bear the cost of RETT. This is entirely permissible as a contractual arrangement between them. In Saudi Arabia’s real estate market, especially in developer sales of residential units, passing RETT to the buyer is common.

Here is what that agreement does and does not achieve:

• What it does: Creates a contractual obligation on the buyer to reimburse or pay RETT as between the two parties. The seller can build the transaction price to reflect a “net of RETT” or a “RETT-inclusive” structure depending on the commercial agreement.
• What it does not do: Transfer the legal obligation to ZATCA. ZATCA looks to the transferor as the responsible party. The agreement between buyer and seller is invisible to ZATCA. If RETT is not paid, ZATCA will pursue the transferor — not the buyer — as the default obligated party.

This is a risk that sellers in particular must manage. If you sell a property, agree that the buyer bears RETT, the buyer fails to pay, and the deal completes — you have a contractual claim against the buyer, but ZATCA has a tax claim against you. Those are two different exposures on entirely different timelines and with different enforcement mechanisms.

The transferee is not completely off the hook. Under Article 7(B) of the Implementing Regulations, the transferee becomes jointly and severally liable with the transferor where ZATCA determines the transferee was the cause of the failure to pay RETT. This includes:

• Cases where the transferor and transferee made arrangements aimed at reducing the amount of RETT due or delaying payment
• Cases where the transferee committed any act that led to a violation of the exemption conditions, resulting in non-payment or underpayment of RETT

Joint liability is triggered by ZATCA’s finding of causal involvement — it is not automatic. ZATCA must notify both parties of the tax amount and payment date when it determines joint liability applies. The transferee who actually pays the tax (under joint liability) must notify ZATCA of that payment.

This provision is particularly relevant in structured transactions or corporate deals where the parties engineer an arrangement to minimise RETT exposure. If that structure is found to lack commercial substance or to be designed primarily to avoid RETT, both parties face exposure — not just the transferor.

Corporate and institutional real estate transactions involve additional considerations around who actually discharges the RETT obligation. The Regulations permit any person — not just the transferor — to make the RETT payment (Article 7(A)(1)). This means a holding entity can settle RETT on behalf of a subsidiary, or a transaction sponsor can fund the RETT obligation on behalf of the seller entity.

However, the legal responsibility remains with the transferor. Third-party payment does not change the identity of the primary obligor. If the third-party payment is later unwound or challenged, the RETT liability reverts to the transferor.

In M&A transactions involving real estate, the allocation of RETT in the SPA requires careful drafting. Common structures include:

• Seller-bears-RETT: The stated transaction price is a gross amount, and the seller settles RETT from proceeds. The buyer pays the full price regardless. Clean and simple.
• Buyer-bears-RETT: The stated price is “net of RETT.” The buyer pays the net price plus SAR X in RETT — but the seller must ensure RETT is actually settled before notarization can proceed.
• Escrow arrangement: RETT amount is escrowed at exchange and released to ZATCA at completion. Used in larger transactions where the parties want certainty that RETT will be settled before title passes.

In real estate company share deals — where RETT is triggered by the transfer of 30% or more of interests in a real estate-holding entity — the 30-day payment window from the transfer date (or unconditional agreement date, whichever is earlier) applies. The transferor of the shares is responsible for registering and paying RETT within that window.

Payment mechanics matter in practice. Under Article 7(A) of the Implementing Regulations:

1. The transferor (or their representative) registers the transaction on ZATCA’s electronic portal at zatca.gov.sa
2. The portal generates the RETT payment invoice with a unique transaction reference number and the calculated RETT amount
3. Payment is made to ZATCA’s designated bank account, referencing the unique transaction number
4. ZATCA confirms receipt and issues a registration confirmation notice
5. The confirmation notice is presented to the Notary Public, who will not proceed without it

For standard notarized property sales, the full sequence must be completed before the notary appointment. The notary serves as a gatekeeper: no RETT confirmation, no title transfer. This mechanism virtually eliminates the risk of RETT non-payment on notarized transactions.

For non-notarized transactions (share transfers in real estate companies, usufruct grants, BOOT project completions), the payment timeline is different — 30 days from the relevant trigger date — and requires proactive compliance without the notary enforcement backstop.