Saudi Arabia’s New 5% Real Estate Transaction Tax: Shaping the Future of the Kingdom’s Property Market
Saudi Arabia’s New 5% Real Estate Transaction Tax: Shaping the Future of the Kingdom’s Property Market
Saudi Arabia’s real estate sector is entering a new era. On April 10, 2025, the Zakat, Tax and Customs Authority (ZATCA) officially introduced the 5% Real Estate Transaction Tax (RETT)—a landmark regulation that applies to all property sales and transfers across the Kingdom.
This step is not just a tax change; it is a strategic reform that will reshape the real estate, construction, and investment landscape for years to come. For developers, investors, and architectural and engineering (AEC) professionals, understanding RETT is essential to staying ahead in an increasingly competitive and transparent market.
A Clearer, More Regulated Market
The new RETT applies to:
- All property types: residential, commercial, and industrial.
- All ownership structures: full or partial ownership.
- All transfer statuses: documented or undocumented.
Crucially, all property transfers must now be registered on the RETT platform through ZATCA’s official website, where details of the transaction, exemptions, and valuations are declared before the transfer is formalized by a notary or legal authority.
This move creates transparency across the sector, standardizing how property transactions are documented, reported, and valued. It also reduces ambiguity, providing both local and international stakeholders with a clearer legal and financial framework for operating in Saudi Arabia.
Encouraging Responsible Investment
One of the most important outcomes of the new RETT is the way it shapes investor behavior.
- Fair market value checks mean undervaluing properties to reduce fees will no longer pass unnoticed.
- Reduced penalties (from 5% to 2% for late payments) make compliance less burdensome, encouraging timely reporting.
- Exemptions for families, inheritances, and endowments ensure the tax does not burden personal wealth transfers or charitable contributions.
- The 30% rule—which exempts transfers of smaller ownership stakes (under 30%) within three years—offers flexibility for joint ventures and phased divestments.
These mechanisms balance growth with accountability, making Saudi Arabia’s market more attractive for foreign investors, while also safeguarding the interests of local stakeholders.
The Bigger Picture: Real Estate as a Pillar of Vision 2030
The introduction of RETT aligns with Vision 2030, Saudi Arabia’s blueprint for economic diversification. By strengthening the regulatory environment, RETT helps create a real estate sector that is:
- Transparent: Clearer frameworks inspire investor confidence.
- Sustainable: Tax revenues can support infrastructure, housing, and cultural projects.
- Globally competitive: Standardized tax and reporting practices align Saudi Arabia with international norms.
According to JLL, Saudi Arabia’s non-oil sector is projected to grow by 5.8% in 2025, up from 4.5% in 2024, with the construction sector leading the charge—backed by $29.5 billion worth of project awards in 2024 alone. By 2029, the Kingdom’s real estate market is expected to reach $101.62 billion, expanding at a compound annual growth rate of 8%.
In this context, RETT is not just a tax—it is a cornerstone of a maturing property market that supports giga-projects, mixed-use developments, and new urban models.
What This Means for Developers, Investors, and AEC Firms
The impact of RETT will ripple across the industry:
- Developers
- Must consider RETT in feasibility studies and pro formas.
- Project financing and phase timing may need adjustment to account for transaction costs.
- Transparency requirements will raise standards for documentation and valuation.
- Investors
- Gain more confidence in a regulated, transparent market.
- Benefit from clear exemptions that support family and long-term holdings.
- Can structure investments with greater foresight, especially under the 30% rule.
- Architectural & Engineering (AEC) Professionals
- RETT drives more disciplined project planning. With clearer financial structures, clients will expect better-aligned designs, phasing, and cost efficiency.
- Giga-projects and private developments alike will require rigorous reporting, where consultancies can help bridge design, construction, and commercial considerations.
- As the sector matures, multidisciplinary consultancies will play a bigger role in guiding clients through not only design excellence, but also strategic compliance and project delivery.
Building a Transparent and Competitive Future
The Real Estate Transaction Tax is more than a financial tool—it is a signal of Saudi Arabia’s long-term ambitions. By embedding clarity, accountability, and structure into the property market, the Kingdom is laying the groundwork for a globally competitive real estate sector.
For investors, it means a safer, clearer playing field.
For developers, it means integrating compliance into every stage of the project lifecycle.
For AEC firms, it means new opportunities to support clients in shaping projects that are not only visionary but also financially and strategically aligned with regulatory frameworks.
