'Zakat and Tax' Clarifies Value Added Tax on Individual Real Estate Sales

The Saudi Zakat, Tax and Customs Authority explained the mechanisms for exempting real estate from the Real Estate Transaction Tax, in response to an inquiry regarding exempting properties valued at 375,000 riyals or less from the tax.

The Authority stated that according to the procedures issued under Board Decision No. (26-04-10) dated August 16, 2020, Value Added Tax was not due on real estate sold by an individual between January 1, 2018, and the start date of the application of the Real Estate Transaction Tax on October 4, 2020, provided that the individual is not a natural person regularly engaged in real estate sales for profit.

It added that an individual is considered to be engaged in the activity of selling real estate if they execute more than one real estate disposal transaction within any 12 consecutive months, and tax is due if the total value of these transactions exceeds the mandatory registration threshold in the GCC Common VAT Agreement, which was 1 million riyals in 2018 and 375,000 riyals in 2019 and thereafter.

It noted that if an individual paid un-due Value Added Tax and had not previously deducted input tax related to the property, they can submit a refund request to the Committees for Resolution of Zakat, Tax, and Customs Violations and Disputes.

What Do These Terms Mean?

Value Added Tax: An indirect tax added to the price of goods and services and paid upon purchase.

Real Estate Transaction Tax: A tax imposed on the sale of real estate in Saudi Arabia, which came into effect on October 4, 2020.

Input Tax: The tax paid by a business on its purchases, which can be deducted from its output tax.