KSA: New exceptions from the Real Estate Transaction Tax ("RETT")

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24 January, 2021

In brief

The Board of Directors of the General Authority of Zakat and Tax (“GAZT”) has approved the amendment/additions to Article (3) paragraph (a) of the KSA Real Estate Transaction Tax Implementing Regulations.

Those amendments aim to extend the scope of application of the RETT exemption to certain transactions. The decision enters into force on 22 January 2021.

The official announcement can be accessed through the following link:

https://www.uqn.gov.sa/images/uqn/4867.pdf

In detail

Pursuant to the Royal Order A/84 exempting the supply of real estate properties in KSA from VAT and reference to what is stated in paragraph “d” of Article 4 and paragraph “a/13” of Article 3 of RETT Implementing Regulations, the Board of Directors of GAZT has approved amendment/additions to Article 3a of the RETT Implementing Regulations.

The following additions have been made to Article 3 paragraph A related to transactions that have been excluded (partially or in full) from the scope of taxation:

a) Amendment to exclusion Number 10:

Prior to amendment After the amendment
Dispose the property as an in-kind contribution by any person as the capital of the joint stock companies, provided that the corresponding shares are not disposed of for a period of five years Dispose the property as an in-kind contribution by any person as the capital of the joint stock companies, limited liability companies, joint companies or special (limited) partnership companies provided that the corresponding shares are not disposed of for a period of five years from the date of registration/owning the shares/units corresponding to the property. These companies has to maintain and keep audited financial statements from certified external auditor during that period.

b) Following new  exclusions have been added:

Number 13 - Disposal of the property by a shareholder/partner in a company to the company’s name, provided that the property was booked in the company's assets account before the Regulations entered into force and the disposer submits audited financial statements or a certificate from a licensed legal accountant proving the property is part of the company's assets before the date on which the Regulations entered into effect until the date of disposal.

Number 14 - Disposal of the real estate properties as an in-kind contribution by any person in the capital of a real estate investment fund upon establishing the fund in accordance with the rules and regulations of the Capital Market Authority. This exclusion does not include the funds that are established for the purpose of renting real estate properties.

The Takeaway

These additional RETT exemptions should be carefully considered by all taxpayers planning to restructure or contemplating a transfer of real estate properties to ensure they meet the condition to avail the benefit of such transaction.

Contact us

Mohammed Yaghmour

Leader, Zakat and Tax Leader - Saudi Arabia. Clients & Markets, PwC Middle East

Tel: +966 (12) 610 4400

Yaseen AbuAlkheer

KSA Tax Partner, PwC Middle East

Tel: +966544250540

Fehmi Mounla

Partner, Zakat and Tax, PwC Middle East

Tel: +966 2 610 4400

Mohammad Hussein Amawi

Partner, PwC Middle East

Tel: +966 126104400

Suleman Mulla

Partner, International Tax, PwC Middle East

Tel: +966 54 122 8051

Maher ElAawar

Partner, Middle East Indirect Tax and Fiscal Policy, PwC Middle East

Tel: +971 (0) 56 216 1109

Mohammed Al-Obaidi

Tax Partner, PwC Middle East

Tel: +966 1 465 4240

Fayez Aldebs

Partner in Tax, PwC Middle East

Tel: +966 11 0400

Soudki Zawaydeh

Partner, PwC Middle East

Tel: +966 11 465 4240

Chadi Abou Chakra

Partner, Indirect Tax and Fiscal Policy, PwC Middle East

Tel: +966 11 211 0400 Ext: 1858

Mohamed Harby

Partner, PwC Middle East

Tel: +966 56 907 2618

Ebrahim Karolia

Partner, International Tax and M&A Services, PwC Saudi Arabia

Tel: +966 11 211 0400 ext. 1771

Wael Osman

Tax & Zakat Partner, PwC Middle East

Tel: +966 13 849 6311

Mugahid Hussein

Partner in Tax, PwC Middle East

Tel: +966 (0)13 849 6311

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