Article 1 of the Saudi Real Estate Transaction Tax Law

This article is the Law's definitions article, and knowing it is essential for understanding the other articles, because every term in the Law is understood in the meaning set here unless the context requires otherwise.

The most important practical definitions:

• The Authority: the Zakat, Tax and Customs Authority; the Board is its board of directors; the Governor is its governor; and the Regulations are the regulations necessary to implement the Law.
• Real estate: immovable property inside the Kingdom, so the Law concerns real estate located in the Kingdom.
• Real estate disposition: any disposition that transfers ownership of real estate, or transfers its usufruct permanently, directly or indirectly, or transfers its usufruct for a period of more than 50 years. It is not limited to sale; it includes transferring permanent or very long-term usufruct.
• Real estate company: any company, fund or entity, whatever the purpose of its establishment, that owns real estate in the Kingdom directly or indirectly with the aim of generating revenue from selling or leasing it, provided that the fair market value of that real estate exceeds a percentage of the total fair market value of its assets set by the Regulations, which may not be less than 50%.
• The disposer: whoever carries out the real estate disposition for their own benefit or on behalf of another, and the transferee: whoever receives the rights connected with the real estate, or some of them.
• Fair market value: the consideration for which the real estate can be traded in an open market between two independent parties in a similar or comparable disposition according to the approved real estate indicators, as specified by the Regulations.
• Documentation: the procedures that ensure the real estate disposition is proven, in accordance with the relevant legal provisions.

Article 2 builds on these definitions, as it imposes the tax at 5% on a real estate disposition in the meaning set here.