Saudi Arabia's King Salman recently issued a royal decree, exempting real estate supplies from the value-added tax (VAT), and imposing a real estate transaction tax at 5%. The General Authority of Zakat and Tax (GAZT) explained, in the simplified guide for real estate transaction tax, the difference between VAT and real estate transaction tax in a number of cases, as shown in the table below:
|
Difference between VAT, real estate transaction tax |
|||
|
Case |
Previously |
Currently |
|
|
VAT |
VAT |
Real Estate Transaction Tax |
|
|
Sale of residential real estate |
15 % |
Exempt |
5 % |
|
Sale of commercial real estate |
15 % |
Exempt |
5 % |
|
Sale of land plot (residential, commercial, agricultural) |
15 % |
Exempt |
5 % |
|
Lease of residential real estate |
Exempted |
Exempt |
N/A |
|
Lease of commercial real estate |
15 % |
15 % |
N/A |
|
First home for citizens (villa, apartment, residential unit) |
The state shall bear the due tax at not more than SAR 850,000 of the real estate value |
Exempt |
The state shall bear the due tax at not more than SAR 1 million of the real estate value |
|
Sale of real estate to a government entity |
15 % |
Exempt |
Not subject to tax |
|
Sale of real estate by a government entity in its capacity as a public authority |
Not subject to tax |
Exempt |
Not subject to tax |
|
Sale of real estate by a government entity for commercial or investment purposes |
15 % |
Exempt |
5 % |
|
Sale of real estate to a diplomatic entity or an approved international organization |
15 % |
Exempt |
Not subject to tax |
|
Donation of real estate to spouse or relatives (up to second degree) |
Not subject to tax |
Exempt |
Not subject to tax |
|
Donation of real estate to any other party |
15 % |
Exempt |
5 % |
|
Expropriation of real estate for public benefit |
15 % |
Exempt |
Not subject to tax |
|
Provision of real estate as an in-kind share in the capital of joint stock companies, while retaining shares for a period of 5 years |
15 % |
Exempt |
Not subject to tax |
|
Usufruct right for real estate for a period of more than 50 years |
15 % |
15% (with redemption right for the registerer) |
5 % |
|
Inputs for building real estate, such as building materials and other |
15 % |
15 % |
N/A |
|
Redemption of input tax for sale of real estate |
Input tax shall be deducted in returns |
Input tax shall not be deducted in returns |
Not refundable |
GAZT indicated that the redemption of the value-added tax paid on private purchases (such as building materials and others) in VAT-exempted real estate, may only be made for real estate developers licensed and qualified for redemption.
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