Tax Alert: Amendments to the RETT implementing

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On 3 May 2024, the Zakat, Tax and Customs Authority ZATCA announced amendments to the Real Estate Transaction Tax RETT Implementing Regulations. These changes aim to provide more transparency and clarification with respect to RETT implications. A summary of the amendments is provided below:

With reference to the RETT exemption involving transfer of ownership from an individual to a company, ZATCA clarified that such property must be recognized as an asset in the books of accounts before the effective date of the implementing regulations and such individual must be a shareholder in the company on the date of recognizing the asset in the books of accounts irrespective of the fact that he is a shareholder on the date of transfer of title or not (amendment to the Article 3(a)(14)).
Amending the scope of the exemption to real estate transactions involving in-kind subscription to any real estate investment fund established in line with the Capital Market Authority CMA guidelines (amendment to Article 3(a)(15).

Key amendments are as follows:

a) It shall include all real estate fund types of whichever purpose. Initial restriction with respect to funds with the purpose of leasing real estate is now removed.

b) The requirement with respect to in-kind subscription only upon the initial establishment of funds is now removed.

c) The fund units or shares corresponding to the real estate disposal must not be disposed of until the date of termination or liquidation of the fund, or for a period of five years from the date of registration or ownership of the units or shares, whichever comes first to avail the exemption (new condition inserted).

Change in percentage of shareholding in a company or units of a fund due to the public offering of shares will not be considered as a breach of condition for availing RETT exemption (new addition to Article 3(a)).
With respect to the tax due date to cover build, own, operate and transfer (BOOT) transactions, the tax shall be payable within 30 days from the date of transfer of ownership or possession of property to the transferee. (Article 4).
BOOT contracts are also covered under the purview of penalties, if applicable (Article 4(b)).

ZATCA has made available an updated guideline for real estate transaction tax in English and Arabic to account for the amendments to the regulations.

For detailed discussions on how the proposed amendments can affect your business, please contact our tax team: