Buying property in Saudi Arabia involves more than the advertised purchase price. One of the main transaction costs investors need to understand is Real Estate Transaction Tax, or RETT. RETT is currently charged at 5% on taxable real estate transactions in Saudi Arabia. It applies to property transfers rather than to annual ownership.
For investors, the important questions are simple: when does RETT apply, who is responsible for paying it, how is it calculated and which transactions can be exempt?
Standard Rate
Primary ZATCA Liability
No General Threshold
What Is Real Estate Transaction Tax?
RETT is a tax imposed when a qualifying real estate transaction takes place. Saudi Arabia’s current RETT Law came into force on 10 April 2025, replacing the earlier regulatory framework.
The tax generally applies when ownership or certain real estate rights are transferred.
This can include:
- Property Sales
- Transfers of Ownership
- Property Exchanges
- Assignments
- Certain Gifts
- Finance Lease Arrangements
- Long-Term Usufruct Rights Exceeding 50 Years
RETT is transaction-based. There is no general minimum transaction value below which ordinary taxable property sales automatically escape the tax.
How Much Is RETT?
The standard RETT rate is 5%. The tax is generally calculated using the agreed transaction value, provided that this is not below the property’s fair market value.
For example:
Property Value
RETT Rate
RETT
A SAR 2 million taxable transaction would therefore normally generate SAR 100,000 of RETT.
Investors should include this cost when calculating the total amount required for an acquisition.
Who Pays RETT: Buyer or Seller?
Under the RETT framework, the seller or disposer is responsible for submitting the transaction and is obligated to pay the tax to ZATCA.
However, the parties can agree commercially that the buyer will bear the RETT cost.
That agreement does not automatically transfer the seller’s legal responsibility toward ZATCA.
In practice:
- The seller/disposer registers the transaction
- The RETT invoice is generated
- The parties may agree who financially bears the cost
- Another person can pay the invoice
- The seller remains responsible toward ZATCA
- The seller and buyer can be jointly liable for tax obligations
This distinction matters when negotiating a purchase contract.
If the buyer agrees to pay RETT, the tax effectively increases the buyer’s acquisition cost.
Compare the Full Investment Cost
When Is RETT Paid?
RETT is due when the taxable real estate transaction occurs and may be paid before that date. For a standard property transfer, the transaction must be registered through ZATCA’s RETT service before the ownership transfer or contract documentation is completed.
The relevant authority will check whether:
- The transaction has been registered
- The required tax has been paid
- Or a valid exemption applies
A property transfer generally cannot proceed until this position is confirmed.
Does RETT Apply to Off-Plan Property?
RETT can also apply to qualifying off-plan transactions. The timing and documentation process may differ from a completed property transaction, so investors should not assume that tax becomes payable simply because an initial reservation amount has been paid.
Before buying off-plan, check:
- Project licensing
- Contract structure
- Escrow arrangements
- RETT treatment
- Payment milestones
- Ownership documentation
RETT should be considered alongside the full off-plan investment cost rather than treated in isolation.
Are Any Transactions Exempt From RETT?
Yes. Saudi Arabia’s RETT framework contains a number of exemptions. They depend on the legal form and circumstances of the transaction.
Examples include certain:
- Estate divisions and distributions
- Documented legal wills
- Property transfers for public benefit
- Transfers to qualifying charitable or family endowments
- Documented gifts to a spouse or relatives up to the third degree
- Specified corporate and investment-fund restructurings
Conditions matter. For example, a qualifying family gift may be exempt, while an ordinary sale to the same relative can still be taxable.
Investors should therefore verify the specific exemption rather than assume that a transaction is exempt simply because the parties are related.
What About a Saudi Citizen’s First Home?
Saudi Arabia provides support for qualifying Saudi citizens purchasing their first home. The state bears RETT on up to SAR 1 million of the first-home purchase price, subject to the applicable eligibility and procedural requirements.
Where the purchase price exceeds the supported amount, RETT can still apply to the remaining taxable portion. This support is different from saying that all first-home transactions are automatically exempt.
Is RETT the Same as VAT?
No. RETT and Value Added Tax are separate taxes. Real estate sales that fall within the RETT framework are generally treated under the dedicated real estate transaction tax system rather than being charged the standard 15% VAT on the same property sale.
Other services connected with a transaction may have their own tax treatment.
Investors should therefore separate the property transfer tax from other professional, financing or service costs.
Why RETT Matters for Property Returns
A 5% transaction tax can materially change an investment calculation. Suppose an investor purchases a property for SAR 1 million and agrees to bear the RETT.
The acquisition cost is already SAR 1.05 million before considering:
- Legal or advisory fees
- Financing costs
- Valuation
- Furnishing
- Property management
- Service charges
If the investor later calculates rental yield using only the SAR 1 million purchase price, the return will appear stronger than it really is.
For a more realistic investment analysis, calculate returns using the total capital committed.
What Should Investors Check Before Signing?
Before completing a Saudi property purchase, confirm:
- Whether RETT Applies
- The Taxable Property Value
- Who Will Bear the Cost
- Whether an Exemption Applies
- When Payment Is Due
- Whether the Transaction Has Been Registered
- What Other Acquisition Costs Apply
Do not leave RETT until the final ownership-transfer stage.
It should be included in the budget before you agree on the final purchase price.
Frequently Asked Questions
What Is the RETT Rate in Saudi Arabia?
The current Real Estate Transaction Tax rate is 5% on taxable real estate transactions.
Who Is Legally Responsible for RETT?
The seller or disposer is responsible for registering the transaction and paying the tax to ZATCA, although the parties can agree that the buyer will bear the cost.
Can the Buyer Pay RETT?
Yes. Another person can pay the RETT invoice, including the buyer. This does not automatically remove the seller’s responsibility toward ZATCA.
Is There a Minimum Value Before RETT Applies?
There is no general registration threshold. Taxable transactions are subject to RETT unless a specific exemption applies.
Is RETT Based on the Purchase Price?
RETT is generally calculated on the agreed transaction value, provided that it is not below fair market value.
Are Property Gifts Subject to RETT?
Some gifts are exempt, including qualifying documented gifts to a spouse or relatives up to the third degree, subject to the applicable conditions.
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