The Zakat, Tax and Customs Authority (ZATCA) published on May 3, 2024 the newly amended Real Estate Transaction Tax Executive Regulations (RETT) pursuant to the resolution of His Excellency the Minister of Finance, No. (1445-88-1) issued on 09/02/1445 AH, corresponding to 03/12/2024 AD. The amendments published in Umm Al-Qura newspaper, issue No. (5030) dated 10/24/1445 AH, corresponding to 03/05/2024 AD entered into force as if this date.
Main amendments summary
The amendments include the addition of a new paragraph to Article III and modifications to several paragraphs in Articles III and IV. The table listing all details is accessible through the following link:
https://uqn.gov.sa/details?p=24892
Our interpretation: the amendments effect
1- Article III (a) (14): The paragraph has been revised to enhance clarity, and the exception has been elaborated to clarify that a partner may utilize it even after departing from the company. This means that the exemption does not hinge on the partner's continued affiliation with the company at the time of disposal. Additionally, the scope of property disposal, owned by or formerly associated with the partner, has been broadened. This expansion includes the transfer of property to any company, irrespective of whether it is the company in which the disposer remains or once was a partner, or to any other company, thereby rendering the provision more accessible to the general public {The word company is used with an indefinite article}.
2- Article III (a) (15): This paragraph has been rewritten. The Authority confirmed the exception for real estate disposal by presenting it as an in-kind subscription to the capital of a real estate investment fund at any time and not only when the fund is initially established, on the condition that the fund's units or shares corresponding to the real estate transaction are not disposed of until the date of the fund's termination or liquidation, or for a period of five years from the date of registration or ownership of the units or shares, whichever comes first. The exception does not include funds that are established for the purpose of renting real estate.
3- New addition to Paragraph (A) of Article III in response to challenges in the interpretation of certain provisions regarding restrictions on altering ownership percentages, shares, or equivalent interests of disposed property within designated timeframes. An additional paragraph is introduced in order to clarify and supplement these provisions as following: A change in the percentage of ownership through a public offering of the shares of the disposed company or the units of the disposed fund in accordance with the rules and regulations of the Capital Market Authority is not considered a violation of the condition of not disposing of the shares or shares corresponding to the excluded real estate disposal.
4- Article IV: The Authority amended the article's introduction excluding the disposal date for (build, own, operate, and transfer) projects. The tax is due on the actual transfer date of ownership or possession, not the disposal date.
5- Article IV (b): The Authority amended the date of the real estate tax payment aligning it for (build, own, operate, and transfer) projects with the actual transfer of ownership or possession.
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