The real estate sector in Saudi Arabia is one of the key elements of Vision 2030 that is considered essential for realizing the Kingdom’s strategic economic goals. The Kingdom aims to raise the percentage of Saudi citizens’ home ownership and is working towards this goal by increasing the availability of housing for citizens and facilitating house ownership.
As part of these efforts and to mitigate the tax burden on the real estate industry, a Royal Decree was issued on 1 October 2020 creating a new Real Estate Transaction Tax (RETT) with a rate of 5% to replace the 15% VAT rate on real estate transactions. All real estate transactions that take place after 4 October 2020 will be subject to RETT, although there are certain exemptions provided for in the legislation (e.g. the government will bear the tax due on the first SAR 1 million of the purchase value of Saudi Nationals’ first home.
The new tax will have a significant impact on the real estate industry, especially with the limitation of input VAT deductions related to real estate transactions.
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