What is the real estate transaction tax law in Saudi Arabia?

The tax began with Royal Order A/84 dated 14/2/1442H, which exempted property sales from VAT and replaced it with a 5% real estate transaction tax from 4 October 2020. The current law was published on 11 October 2024 and came into force, together with its Implementing Regulation approved by ZATCA’s board on 24 March 2025, on 10 April 2025, when the former regulation ceased to apply.

Council of Ministers Decision No. 239 dated 14/3/1446H tasks ZATCA with reviewing how the tax is calculated three years after the law takes effect, including possible bands based on the property’s use and location. ZATCA’s detailed guideline issued in May 2026 still states the rate as 5%.

Real estate transactions include sales and, in ZATCA’s guideline, gifts or waivers, barter, finance leases, Ijara ending in ownership, transfers of interests in real estate companies under the regulation’s thresholds, and usufruct contracts lasting more than 50 years. An ordinary lease that does not end in ownership and lasts 50 years or less falls outside the definition. The tax covers developed and undeveloped land and buildings, whether completed or sold off plan.

It is calculated on the agreed value as long as that is within fair market value, excluding the financing cost charged by licensed financiers. Within three years of the transaction, ZATCA may recalculate it if the declared value proves to be below fair market value.

Article 3 lists 21 cases of full exemption whose conditions are set by the regulation, and the Council of Ministers may exempt other transactions. The most relevant to individuals are:

The remaining cases concern public bodies, companies, funds, developers licensed for off-plan sales and others. A citizen’s first home is not one of the law’s exemptions; instead, the State bears the tax for eligible buyers on up to the first SAR 1,000,000 of the price.

The tax falls due on the transaction date, which by law is the notarization date, and is paid on or before it; a transaction whose tax is unpaid may not be notarized. For transactions that are not notarized, it is paid within 30 days of the transaction. The transferor, such as the seller, registers the transaction in ZATCA’s online service even when it is exempt, and is legally liable for the tax, although the parties may agree that the buyer pays.

The late-payment fine is 2% of the unpaid tax for each month or part of a month, capped at 50%, plus 1% of the unpaid tax for each month or part of a month if ZATCA amends the amount due, counted from 30 days after the amendment notice. Evasion carries a fine of up to three times the tax, which also applies to anyone who took part in or helped it, and other violations carry a fine of up to the tax due or SAR 50,000, whichever is higher.

The Royal Decree confirms that real estate supplies subject to this tax are exempt from VAT, so a sale does not bear both taxes, but the commission of a VAT-registered broker still carries 15% VAT.