Saudi Arabia has rolled out a major update to its Real Estate Transaction Tax (RETT), offering new exemptions and replacing the former VAT regime on property deals. The new law — effective from April 9, 2025 — aims to stimulate homeownership, simplify compliance, and bring transparency to the real estate sector.

The RETT imposes a flat 5% tax on most real estate transactions, including sales, transfers, and company shares involving real estate holdings over 50% of total assets — whether between individuals or businesses.

 

Key Exemptions Empower Young Saudis and Families

Several exemptions ease the burden for first-time buyers and family-related transactions such as:

• Family Transfers: Gifts, inheritance, and spousal transactions are RETT-exempt.

• First-Time Buyers: Saudi citizens are exempt from the 5% tax on properties valued up to SR1 million, with the government covering the amount.

• Charities and Housing Programs: Transfers to charitable organizations, endowments, and under government housing initiatives are also excluded.

   

Boost to Real Estate Development and Legal Clarity

New residential projects are being delivered across major cities in Saudi Arabia, aided by reforms to speed up land availability and stabilize rental prices in hotspots like Riyadh.

The updated RETT also replaces the former 15% VAT (abolished in October 2020) with a 5% transaction-based tax, following a Royal Decree. This shift enhances legal clarity for real estate developers, lawyers, and investors, especially those involved in BOOT or large-scale real estate ventures

 

Legal Experts Applaud the Move

Legal professionals and real estate lawyers in the Kingdom view the updated RETT as a strategic enabler for the property market:

 

Aligning with Vision 2030

The SR1 million tax-free cap on first-time home purchases continues to drive Saudi Arabia’s Vision 2030 objectives — improving housing affordability and increasing ownership among nationals.

 

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