Understanding the Payment of Tax and Obligations in Real Estate Transactions in Saudi Arabia

In Saudi Arabia, the taxation of real estate transactions is a critical area for both buyers and sellers to understand. With the introduction of the Real Estate Transaction Tax (RETT), the Saudi tax authorities have clarified key points regarding the payment due dates and the responsibilities of individuals involved in the transaction. Let’s dive into two significant aspects of the law: special cases for the payment of tax and the individuals obligated to pay the tax.

3.5 Special Cases of the Date of Payment of Tax Due

The official documentation procedure typically ensures the smooth processing of tax obligations. However, there are situations where the tax payment due date is set apart from the standard procedures. According to the guidelines under Saudi law, if the official documentation procedures are not followed (such as with an authorized notary or competent administrative authority), the tax is due within 30 calendar days from the date of the contract or final agreement. This period is crucial, and failure to pay within this timeframe results in fines.

This provision is especially relevant in BOOT contracts (Build-Operate-Transfer), where the tax payment is tied to the transfer of ownership or the actual transfer of possession. Even if the transaction isn’t formally documented, the tax is due within the 30-day window, with fines applicable if delayed beyond this period.

Interestingly, proof of the date of disposal can be established through any means or evidence that demonstrates the occurrence of the transaction. This flexibility aims to allow taxpayers to provide various forms of evidence., even if they don’t have the official documentation in place immediately.3.6 The Individuals Obligated to Pay the Tax

The law is clear when it comes to who bears the responsibility for paying the real estate tax. In principle, the disposer (seller) is the individual primarily responsible for fulfilling the tax payment obligation. However, it is possible for the buyer and seller to agree that the buyer will bear the tax responsibility, but this agreement must be explicitly stated in the contract.

Moreover, the contract should clearly differentiate the tax amounts and the total value of the property, specifying the tax value separately. This clarification is essential to ensure transparency in the transaction.

Despite any agreement between the parties, the disposer (seller) remains ultimately responsible for submitting the tax to the authorities. The disposer holds full responsibility for ensuring that the tax is paid, along with any associated obligations. If the tax is unpaid, both the disposer and the buyer could be jointly liable under the law, as per the Implementing Regulations of the Real Estate Transaction Tax.

The Saudi tax authorities have the right to pursue both parties for the tax liabilities due, either jointly or individually, depending on the specific circumstances surrounding the transaction. Therefore, both parties should be fully aware of their financial obligations under the law and ensure the correct handling of these duties.

Conclusion

Real estate transactions in Saudi Arabia are closely regulated, especially regarding tax payments. Sellers, in general, carry the responsibility for ensuring tax payments are made, but buyers and sellers can agree to shift this responsibility. Understanding when and how taxes are due—especially in special cases involving BOOT contracts and informal agreements—helps both buyers and sellers avoid fines and legal complications.

Summary

In Saudi Arabia, real estate tax obligations are governed by the Real Estate Transaction Tax (RETT). The tax is due within 30 days of the contract or agreement date if official documentation procedures are not followed, with fines for late payments. In BOOT contracts, the tax is tied to the transfer of ownership or possession. While the seller (disposer) is generally responsible for the tax, both parties can agree for the buyer to bear it, provided it’s clearly stated in the contract. However, the disposer remains liable for submitting the tax to the authorities, and both parties may be jointly responsible for any unpaid taxes.

Disclaimer: The Content offer general guidance and should not be considered legal, financial, or tax advice. Consult qualified professionals for personalized guidance. While efforts have been made to ensure accuracy, no guarantee is provided for completeness or applicability to individual situations. Users are responsible for their interpretation and actions based on this information, at their own risk. 

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