KSA: New exceptions from the Real Estate Transaction Tax ("RETT")
24 January, 2021
In brief
The Board of Directors of the General Authority of Zakat and Tax (“GAZT”) has approved the amendment/additions to Article (3) paragraph (a) of the KSA Real Estate Transaction Tax Implementing Regulations.
Those amendments aim to extend the scope of application of the RETT exemption to certain transactions. The decision enters into force on 22 January 2021.
The official announcement can be accessed through the following link:
In detail
Pursuant to the Royal Order A/84 exempting the supply of real estate properties in KSA from VAT and reference to what is stated in paragraph “d” of Article 4 and paragraph “a/13” of Article 3 of RETT Implementing Regulations, the Board of Directors of GAZT has approved amendment/additions to Article 3a of the RETT Implementing Regulations.
The following additions have been made to Article 3 paragraph A related to transactions that have been excluded (partially or in full) from the scope of taxation:
a) Amendment to exclusion Number 10:
| Prior to amendment | After the amendment |
| Dispose the property as an in-kind contribution by any person as the capital of the joint stock companies, provided that the corresponding shares are not disposed of for a period of five years | Dispose the property as an in-kind contribution by any person as the capital of the joint stock companies, limited liability companies, joint companies or special (limited) partnership companies provided that the corresponding shares are not disposed of for a period of five years from the date of registration/owning the shares/units corresponding to the property. These companies has to maintain and keep audited financial statements from certified external auditor during that period. |
b) Following new exclusions have been added:
Number 13 - Disposal of the property by a shareholder/partner in a company to the company’s name, provided that the property was booked in the company's assets account before the Regulations entered into force and the disposer submits audited financial statements or a certificate from a licensed legal accountant proving the property is part of the company's assets before the date on which the Regulations entered into effect until the date of disposal.
Number 14 - Disposal of the real estate properties as an in-kind contribution by any person in the capital of a real estate investment fund upon establishing the fund in accordance with the rules and regulations of the Capital Market Authority. This exclusion does not include the funds that are established for the purpose of renting real estate properties.
The Takeaway
These additional RETT exemptions should be carefully considered by all taxpayers planning to restructure or contemplating a transfer of real estate properties to ensure they meet the condition to avail the benefit of such transaction.
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