GAZT explains difference between VAT and real estate transaction tax

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
Case	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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GAZT explains real estate transaction tax, says effective as of Oct. 4

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