The Zakat, Tax and Customs Authority (ZATCA) has amended the Real Estate Transaction Tax Implementing Regulations. The new amendments include RETT exemptions, most notably exemptions for individuals offering the property they own as a share in kind in exchange for investment units in a real estate investment fund. The amended regulations also cover exemptions for transferring ownership of a person's real estate to a company in which he owns shares for the purpose of modifying ownership; and amending the due dates for (construction, ownership, operation and transfer) projects.
ZATCA clarified that the amendments to the ownership modification exemptions involve the transfer of an ownership to a property from an individual to a company in which he presently owns or had own shares, for the purpose of ownership modification. However, such property must be registered in the company's assets before the effective date of the regulations, and such individual must be a partner in the company on the date the property was recognized as part of its assets, irrespective of whether he continued to be a partner in that company on the date of modification.
ZATCA added that the amendments included the expansion of the scope of the exemptions to real estate transactions that involve an in-kind subscription to the capital of a real estate investment fund established in accordance with the rules and regulations of the Capital Market Authority. It shall include all real estate fund types of whichever purpose, without being limited to real estate funds that aim for initial or construction development. The exemption is also not limited to in-kind transactions that take place only upon the initial establishment of funds, on the condition that the fund's units or shares corresponding to real estate disposal are not disposed of until the date of the fund's termination or liquidation, or for a period of five years from the date of subscription or ownership of the units or shares, whichever comes first.
ZATCA has also made an additional amendment to the provisions of the regulations. The change in the ownership percentage required not to be amended for specific periods after the application of the exemption through the public offering of the company's shares or fund units shall not be deemed a violation of the condition not to dispose of the shares or stocks corresponding to the exempted real estate disposal. Consequently, the exemption shall remain in effect in said cases, to encourage the IPO of company shares and fund units.
The amendments to the RETT Implementing Regulations also included amendments to the tax due dates on project contracts for (construction, ownership, operation, and transfer). The new due dates shall be the date of transfer of ownership or actual possession to the transferee to whom those projects are transferred under previous contracts. The tax shall be paid for said contracts within (30) days from the date of transfer of ownership or actual transfer of property.
ZATCA urges taxpayers and customers to view the detailed and simplified guidelines for RETT on its website, and to reach out in the event of any questions ion the new amendments via its 24/7 call center hotline (19993), Ask ZATCA X account (@Zatca_Care), via e-mail (info@zatca.gov.sa), or by instant messages on (www.zatca.gov.sa).
RETT is imposed at a rate of 5% on real estate whose ownership has been transferred from a person to another by sale, trade-off, assignment or similar manners, with some exceptions based on the provisions of the Real Estate Transaction Tax Implementing Regulations. Any real estate ownership transfer process must be documented on the RETT platform at ZATCA's website first by showing the real estate's data and determining the exclusion on transaction before the real estate conveyance at the notary public or a legally accredited certification body.
