What is VAT on Real Estate?
VAT on real estate is the application of value added tax rules to property transactions, including sales, leases, and construction. Treatment varies by property type, use (residential vs. commercial), and transaction stage.
How It Works
- Determine if the property is residential or commercial.
- Apply VAT, RETT (real estate transaction tax), or exemption rules.
- Issue compliant e-invoices and file VAT returns.
Saudi Context
Saudi Arabia replaced VAT on most residential property sales with a 5% Real Estate Transaction Tax (RETT) in October 2020. Commercial leases and sales generally remain subject to 15% VAT, administered by ZATCA.
Example
A developer sells a commercial office in Riyadh for SAR 10 million. VAT of SAR 1.5 million applies. The same developer sells a villa for SAR 2 million, subject to 5% RETT (SAR 100,000) instead of VAT.