Market Value
Synonyms: Open Market Value، Fair Market Value، MV
Last updated: 2026-09-25
Short Definition
Market value is the estimated amount for which a property should exchange on the valuation date between a willing buyer and a willing seller in an arm's-length transaction, after proper marketing, where each party acted knowledgeably, prudently and without compulsion.
Overview
Legal Basis
No Saudi statute defines market value in a standalone provision; valuers apply the IVS 102 definition, which Article 15 of the Accredited Valuers Law (Royal Decree M/43 of 9/7/1433H) makes binding by requiring compliance with the valuation standards adopted by TAQEEM. Article 8 of the Implementing Regulation of the Real Estate Transaction Tax Law allows ZATCA to verify the disposal value in cases including transactions between related persons, and to assess it within fair market value limits using approved real estate indicators or an accredited valuer; the transferor or transferee may submit a valuation issued by an accredited valuer.
Practical Example
Salman listed his 160 m² apartment in Jeddah at SAR 1,050,000, then sold it for only SAR 700,000 to a family company in which he holds a share. Because the parties are related, ZATCA verified the value using real estate indicators showing comparable sales in the district at about SAR 6,000 per m², roughly SAR 960,000. Salman submitted an accredited valuer's report concluding a market value of SAR 940,000. If ZATCA accepts that valuation, the 5% tax is SAR 47,000 on SAR 940,000 instead of SAR 35,000 on the declared price. The example shows that an agreed price does not replace market value when the transaction is not at arm's length.
Common Mistakes
- ✗Treating the listing or asking price as market value; asking prices are usually higher than completed transaction prices.
- ✗Confusing market value with the book value recorded in financial statements on a cost basis.
- ✗Ignoring highest and best use; land permitted for extra floors or commercial use may be worth more than its current use suggests.
- ✗Relying on a single sale, a related-party sale or a distressed sale as the value benchmark.
- ✗Declaring a below-market value to reduce the Real Estate Transaction Tax; ZATCA may reassess and claim the difference within three years plus penalties.
International Differences
The IVS definition of market value is almost identical to that used by RICS in the UK and the region, and close to the US concept of fair market value. In Turkey valuation reports use pazar değeri, while rayiç bedel is common for values set by municipalities for property tax. In the UAE and Egypt banks generally rely on RICS- or IVS-based reports. The Saudi difference is that fair market value is explicitly used as the benchmark for auditing disposal values for the Real Estate Transaction Tax.
