Saudi Arabia: Guidance on application of real estate transaction tax to “build-own-operate-transfer” contracts

Guidance relating to transactions that may be exempt from real estate transaction tax

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February 4, 2025

The Zakat, Tax and Customs Authority (ZATCA) on January 25, 2025, issued the following guidance on the application of real estate transaction tax (RETT) to “build-own-operate-transfer” (BOOT) contracts:

  • Immovable assets such as machinery, equipment, and fittings that are part of a BOOT project and belong to the operator, but will be transferred to the beneficiary at the end of the contract period, are not subject to RETT.
  • Any transfer of ownership of real estate property to a government entity or a public legal person in Saudi Arabia is exempt from RETT.
  • Any transfer of ownership of real estate property to a beneficiary in the private sector, or an entity not covered by the definition of government entity, is subject to 5% RETT unless any exemption contained in Article 3(A) of the RETT implementing regulations applies.
  • RETT with respect to BOOT contracts must be computed on the fair market value of the real estate on the actual date of the transfer of ownership or possession of the property to the beneficiary and is payable within 30 days from the date the tax becomes due. The prime responsibility for payment of RETT lies with the transferor. However, both the disposer and the transferee are considered jointly liable before ZATCA for any tax due. 

For more information, contact a KPMG tax professional:

Philippe Stephanny | philippestephanny@kpmg.com

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