RETT exemptions in Saudi Arabia: every exemption, its conditions and the clawback periods

How RETT exemptions work

An exemption does not mean the transaction disappears. The seller still registers it on the ZATCA RETT portal, selects the exemption, and receives the proof the notary needs before registering the transfer. ZATCA's own FAQ is explicit that a notarised gift to a spouse, which is exempt, still has to go through the service.

Many exemptions carry a condition that runs for years after the transfer. If the condition is broken, the exemption is lost and the original transaction becomes taxable: the tax falls due on the date of the breach, must be paid within 30 days of it, and the seller must file a correction within 30 days. Every exemption also depends on evidence, which must be kept for five years.

Family transfers: inheritance, gifts and wills

Dividing an estate is exempt, whether the property passes from the deceased to the heirs or is divided among the heirs, but only within each heir's legal share under the inheritance certificate. If one heir takes the house and compensates the others for the excess over their share, that excess is a taxable transaction. A later sale by the heirs, or a sale before division so the cash can be shared, is taxed in the normal way.

A notarised gift to a spouse or a relative up to the third degree is exempt. The third degree covers parents and children; siblings, grandparents and grandchildren; and uncles, aunts, nephews and nieces. A cousin is outside it. The exemption needs a genuine gift: selling a plot to your father is taxable.

The gift exemption carries a three-year condition. If the recipient passes the property within three years to someone who could not have received it tax-free directly from the original donor, the exemption on the first gift falls away. In ZATCA's example, land gifted to a grandfather and passed four months later to the donor's cousin makes the first gift taxable.

A transfer under a notarised lawful will is exempt.

Endowments, charities and the state

• A transfer without consideration to a public, private or joint endowment registered with, and supervised by, the endowments authority. Only that first free transfer is exempt; a sale to an endowment is taxed.
• A transfer without consideration to or from a licensed charitable organisation. Later dealings by the charity for consideration, such as granting a 70-year usufruct, are taxed.
• A transfer to a public agency, a public legal person, or a public-benefit entity, whatever the agency then uses the property for.
• A transfer by a public agency acting as a public authority under its statutory powers, not on commercial terms and not in competition with the private sector. A government body selling villas through an investment programme pays RETT like anyone else.
• Expropriation, or temporary taking, for public benefit under the applicable laws, including the return of the property to its original owner.
• Transactions where one party is a foreign government, an international organisation, or a diplomatic, consular or military mission accredited in the Kingdom, on condition of reciprocity.

Finance and legal events

• A temporary transfer to a licensed financier as security for financing or credit, and the return of the property once the debt is paid. If the financier keeps the property because the debt is not repaid, the transfer becomes taxable. Moving the title between banks when a home finance contract is refinanced, or selling a portfolio of ijarah contracts to a refinancing company, is also covered.
• Transfers completing ijarah or finance-lease contracts concluded before RETT took effect, and transactions that were charged to VAT before notarisation.
• A forced sale ordered by a competent court, including liquidation or administrative liquidation under the Bankruptcy Law.
• Cancellation by mutual consent within 90 days of notarisation, where the property is returned unchanged and the full price is refunded.
• Temporary transfers between an investment fund and its custodian, or between custodians of the same fund, under Capital Market Authority rules.

Business transfers and restructuring

These exemptions are where most of the value, and most of the clawback risk, sits. Each is covered in more detail in the guide to RETT on share transfers and restructuring.

• In-kind contribution to the capital of a company established in the Kingdom. The shares received must not be disposed of for five years, and the company must keep financial statements audited by a certified external auditor throughout those five years.
• A transfer by an individual to a company or investment fund in the Kingdom that the individual owns 100%, directly or indirectly, provided that ownership does not change for five years.
• Transfers between companies or funds in the Kingdom that are 100% owned, directly or indirectly, by the same person, or where one owns 100% of the other, provided the receiving entity stays 100% owned by that person for five years.
• A free transfer to a company or fund 100% owned by an endowment, with the endowment's ownership unchanged for five years.
• In-kind contribution to a real estate investment fund under Capital Market Authority rules, provided the units received are not transferred for five years or until the fund ends, whichever comes first.
• Mergers and acquisitions between legal persons paid only in shares, with proportional ownership and a five-year retention period; acquisitions must also be completed in a single transaction.
• Initial public offerings and trading of listed securities, acquisitions of shares in listed joint-stock companies, and trading of units in unlisted funds below 50% of the fund's units.

Off-plan developers: the 90-day window

A transfer to a real estate developer licensed for off-plan sale and leasing is exempt if, on or before the transfer date, the developer holds that licence and the land has been allocated to an off-plan project with a licensing decision from the competent agency.

If the project licence has not yet been issued, the seller has 90 days to submit it to ZATCA, but must first either pay the tax or give ZATCA a cash or bank guarantee for the same amount. If the licence arrives within 90 days, the guarantee is released or the tax becomes refundable. If it does not, ZATCA cashes the guarantee, and tax paid after the 90 days cannot be refunded.

What does not break a holding period

The regulations list three events that do not count as a breach of a no-transfer condition: a change in ownership through an initial public offering of the company or fund that received the property; an exempt forced sale ordered by a court; and a transfer as part of an exempt merger or acquisition, provided the interests received are then held for the rest of the original period.

The clawback calendar

Put each exempt transfer in a register with its end date and owner. Breaches rarely happen on purpose: they come from a later share sale, a group reorganisation, or a family transfer made without anyone checking the history.

• Gift to a relative: three years from notarisation of the gift.
• In-kind contribution to company capital: five years of holding the shares and of audited financial statements.
• Transfers to 100%-owned companies and funds, and between entities owned by the same person: five years of unchanged ownership.
• Mergers and acquisitions: five years of retention by the same owners.
• In-kind contribution to a real estate fund: five years, or until the fund ends if sooner.
• Off-plan transfer without a project licence: 90 days to file it.
• Cancellation of a notarised sale: within 90 days.

Questions people actually ask

Keep reading

• Guide: Saudi Real Estate Transaction Tax (RETT): the 5% tax on property transfers, explained
• Guide: RETT on share transfers in Saudi real estate companies: the 50% and 30% tests
• Guide: Accounting for Saudi RETT under IFRS: buyers, sellers, developers and clawbacks