GAZT explains difference between VAT and real estate transaction tax

06/10/2020 Argaam


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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