What to take into your next appraisal
- Test RETT and VAT at the transaction level, including exemptions.
- A recoverable tax amount can still need financing.
- Record the tax payer, cash payer and economic bearer separately.
Start with the current RETT framework
ZATCA states a 5% real estate transaction tax and identifies the new RETT law effective from 10 April 2025. Use the law and implementing material for the actual transaction, including its scope, valuation rules and exemptions. An older model label saying simply land VAT is not adequate evidence.
Identify the transferor, transferee, property, transaction date and consideration. Ask the adviser to confirm treatment of non-cash consideration, related parties and any proposed exemption before entering a zero tax assumption.
Sources: Zakat, Tax and Customs Authority: Real Estate Transaction Tax Law
Separate transfer and project input taxes
RETT and VAT should have separate ledgers. A conclusion about the transfer of real estate does not establish VAT treatment of professional fees, building services, rentals or the entity that pays them. ZATCA publishes tax guidance; select the applicable current guide and retain the adviser interpretation for the specific entity.
Record invoice tax separately from recoverable tax. If recovery is uncertain, distinguish the cash payment from an unconfirmed future receipt. Do not fund construction using a refund date that nobody owns.
Bridge the acquisition cash requirement
In a fictional acquisition with SAR 20 million taxable consideration, assume the adviser confirms the full amount is subject to 5% RETT with no exemption. Tax is SAR 1 million. If the commercial agreement makes the buyer fund it at completion, acquisition cash is SAR 21 million before other fees.
This cash allocation does not establish who has the statutory obligation. A second, separate assumption is SAR 150,000 of input tax paid on services and fully recovered four months later. Financing that bridge at a hypothetical simple 8% annual rate costs SAR 4,000: 150,000 × 8% × 4/12.
Use an evidence-backed treatment table
The tax register should make uncertainty visible rather than burying it inside a blended percentage.
| Item | Evidence required | Model treatment |
|---|---|---|
| Land transfer | Tax base, applicable law and exemption analysis | Dated RETT payment |
| Construction invoice | Supplier invoice and supply classification | Gross cash paid |
| Input tax recovery | Entity entitlement and recovery mechanism | Separate dated receivable |
| Operating or disposal receipt | Contract, use and transaction structure | Net revenue plus relevant tax ledger |
Show the cost of an unresolved treatment
Run no-recovery and delayed-recovery cases where the evidence is incomplete. The former affects both profit and cash; the latter may mainly affect peak funding and interest. Report that distinction to the investment committee.
Refresh the treatment when ownership, contracts, project use or legislation changes. A stated tax rate is only one input: the base, timing, relief conditions and responsible party determine the actual cash result.
Sources and further reading
- Real Estate Transaction Tax Law Zakat, Tax and Customs Authority
- VAT guidelines Zakat, Tax and Customs Authority
Published by Feasly. How we prepare our guides. Suggest a correction.
