In light of the comprehensive economic transformations in the Kingdom of Saudi Arabia, tax systems—including real estate taxes—have become an essential part of developing the investment environment. Understanding the Real Estate Disposal Tax (REDT) exemption conditions is a necessity for every property owner or investor, especially with specific legal cases and regulatory requirements that must be met before documenting any property transfer.

What is the Real Estate Disposal Tax (REDT)?

The Real Estate Disposal Tax is a direct tax imposed on any disposal that results in the transfer of property ownership or its benefit from one person to another. This includes sales, assignments, bartering, and gifts not covered by exemptions.

Tax Rate and Application

Saudi Arabia does not impose an annual property tax. Instead, a 5% Real Estate Disposal Tax is applied to the total value of the property at the time of sale or transfer of ownership. This tax does not include any financing costs or expenses related to real estate loans.

How to Register for REDT

Property disposal must be registered before the official title deed transfer (Ifragh) or contract signing via the official tax platform. The process includes:

Logging in as the property owner or disposer.
Identifying the type of disposal and documentation.
Entering full property data and its financial value.
Issuing the payment invoice based on the calculated value.

Calculation Method

The tax is calculated at a fixed rate of 5% of the property value. The property value is determined based on:

Residential Property: Valued by accredited valuers to ensure fair market value.
Commercial or Investment Property: Valued based on similar property prices or specialized assessments.

Formula: Real Estate Disposal Tax = 5% × Property Value

Key Conditions for Tax Exemption

Exemption conditions allow beneficiaries to transfer ownership without paying the 5% tax. Key cases include:

Estate Distribution: Dividing property among heirs.
First & Second Degree Gifts: Donations to parents, children, or spouses.
Charitable Disposals: Transfers to registered charities or endowments (Awqaf).
Public Interest: Transfers to government entities or for public utility.
Expropriation: Compulsory acquisition for public benefit.
Financing Collateral: Temporary transfer of ownership as a guarantee for credit or financing.
Investment Funds: Transfers between investment funds and custodians under specific regulations.

Property Ownership for Non-Saudis

Non-Saudi investors may own property under specific conditions, including:

Holding a license for a professional or economic activity.
Approval from the licensing authority.
For land development projects, the cost must not be less than 30 million SAR, and the project must be invested in within five years.
Note: Non-Saudis are prohibited from owning property within the boundaries of Makkah and Madinah, with limited exceptions for listed companies or specific endowments.

FAQ: Frequently Asked Questions

Is the tax on the buyer or the seller? Legally, the seller is responsible for the tax, though both parties can agree otherwise if documented in the contract.

Who is the "Taxable Person"? The taxable person is the property owner or the individual/entity holding the right of use or benefit.

Are government properties taxed? Government properties designated for public utility are not subject to the tax.

Is there a fee for selling property to foreigners? A 10% deduction of the property value is allocated to the Ministry of Finance upon the sale or purchase of property by non-Saudis.

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