Whenever you sell, buy, gift or otherwise transfer ownership of a property, you are making a real estate disposal (تصرف عقاري). It needs formal procedures and, usually, the Real Estate Transaction Tax (ضريبة التصرفات العقارية). Many problems start with a simple question nobody asked before signing: who pays the tax, and is this deal exempt? This article explains what counts as a real estate disposal, how the tax works, when it is exempt, and what to check before the transfer of title (الإفراغ, the formal conveyance of the deed).
What is a real estate disposal?
It is any act that transfers ownership or possession of a property for the purpose of ownership, or creates a right in rem over it, such as:
- Sale, purchase and transfer of title.
- Gifts and exchanges (swaps).
- Contributing a property as a share in a company's capital.
The disposal is formally documented through the competent authorities, and recorded in the Real Estate Register in districts where real estate registration (التسجيل العيني) has started.
Real Estate Transaction Tax at a glance
| Item | General rule |
|---|---|
| Authority | The Zakat, Tax and Customs Authority (ZATCA) |
| Rate | 5% of the transaction value, as announced at the time of writing |
| On what value? | The property's value in the transaction, or its market value in some cases |
| When is it paid? | Before or at the transfer of title; the transfer is not completed until the tax is paid or the exemption is proven |
| Who pays it? | Set by agreement between the parties, so state it expressly in the contract |
Rates and exemptions are set by the implementing regulations and may change. Check the ZATCA website before any transaction.
Common exemptions
The regulations list exempt cases. Among the best known:
- Distribution of an estate to the heirs, meaning the transfer of a property from the deceased to his heirs.
- Some transactions between relatives, as defined by the regulations.
- Gifts or endowments (waqf) to licensed charities, subject to conditions.
- A Saudi citizen's first home, where the state bears the tax within limits set by the rules.
An exemption is never assumed. It must be requested and proven with documents before the transfer of title. If the property is part of an estate, read identifying heirs and dividing an estate.
Before any real estate transaction: five steps
- Check the title deed (صك) and that it is free of mortgages and freezes. Read checking a property title deed.
- Sign a preliminary contract stating the price, the instalments, who bears the tax and fees, and what happens if the transfer of title cannot go ahead.
- Settle the tax treatment: taxable or exempt, and who pays.
- Pay the tax or prove the exemption before the transfer date.
- Complete the transfer of title and keep every document.
Title deeds and transfer documents are issued in Arabic. If you are a foreign buyer or seller, have the contract and deed explained to you before signing.
Frequently asked questions
Who pays the Real Estate Transaction Tax: the seller or the buyer?
The tax attaches to the transaction itself, and the agreement between the parties decides who actually bears it. That is why many disputes arise when this isn't written into the contract.
Is VAT charged on the sale of a property?
As a rule, a supply of real estate is subject to the Real Estate Transaction Tax instead of VAT, with special rules for some cases. Check with ZATCA for your situation.
I sold a property, the title hasn't been transferred yet, and a dispute has arisen. What now?
It depends on the preliminary contract and what has been paid. The solution may be to compel the other party to complete the transfer, or to rescind the contract and recover what was paid, depending on the case.
Have a property deal or a dispute over one?
The Usus Law Firm team reviews sale contracts and title deeds before the transfer of title, and handles real estate cases in Riyadh and Tabuk, with advice in English.
This article is general legal information and is not a substitute for advice on your specific case. Court proceedings in Saudi Arabia are in Arabic; the official Arabic text of each law prevails.
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