1Issue 3.0 | May 2026

(2) Article 30, Implementing Regulations of VAT Law (as updated pursuant to the decision of the Authority’s board of directors (1-5-20) d. Agricultural land. Hotels, hostels, guest houses, motels, serviced accommodation, or any other building designed to provide temporary accommodation to visitors or travelers are non-residential real estate. Disposal or Sale of Real Estate: Disposal of real estate is not defined for VAT purposes. However, the VAT exemption applies to the supply of real estate “by way of transfer of ownership or disposal thereof as owner (3)”. Although real estate disposal is defined under the RETT Implementing Regulations (4), the definition may not apply consistently across all cases for VAT purposes. Rental of Real Estate: The supply of a specific area of real estate by granting the right to use it through, for example, lease, license, or usufruct, provided that such supply does not result in the transfer of ownership to the recipient. 3. VAT Treatment of Real Estate: An Overview 3.1 Supply of Real Estate 1. A supply of real estate for VAT purposes occurs where a supplier sells or rents real estate located in the Kingdom as part of conducting an economic activity for consideration. 2. Below is a summary of the tax treatment of real estate supplies in the Kingdom: Residential Real Estate Non-Residential Real Estate (3) Article 30 (1), Implementing Regulations of VAT Law (as updated pursuant to the decision of the Authority’s board of direc­ tors (1-5-20) (4) Article 1, Implementing Regulations of RETT (Minister of Finance Decision No. 712). Permanent Housing Commercial premises and locations (offices and factories) Vacant land Agricultural land Partially completed construction works Hotels and short-term accommodations Rental Rental VAT Exempt Subject to a 15% VAT Sale Sale * RETT levied on the transfer of ownership * RETT levied on the transfer of ownership * VAT exempt * VAT exempt Sections 5 and 6 of this Guideline include additional details on VAT application to real estate sale and lease agreements. 3.2 Real Estate Related Supplies Supplies of goods or services related to real estate, which do not involve a supply of real estate, are subject to different tax treatment. Examples of real estate-related services include construction, design, modification, maintenance, or operation of real estate. These services are subject to VAT at a rate of 15% provided that they are connected to real estate located in the Kingdom (5). Real Estate Transaction Tax (RETT) does not apply to services that do not involve the transfer of real estate ownership. Section 7 of this Guideline covers in detail the real estate-related services. 4. Registration 4.1 Mandatory Registration Registration is mandatory for all persons whose annual revenues exceed the prescribed registration threshold, i.e., if the person’s taxable supplies value during any 12-month period exceeded SAR 375,000 the Mandatory Registration Threshold. Then that person must register for VAT in respect of sale transactions, as well as any taxable supplies carried out (6). • The total value of taxable supplies does not include the following: a. Any exempt supply, including the rental of residential real estate and the disposal of real estate after 4th October 2020; or b. Any supply relating to real estate located outside the Kingdom. Registration applies to both legal persons and natural persons who carry out any regular economic activity. Any person obtaining income from renting non-residential real estate is presumed to be carrying out an economic activity and must register where the mandatory VAT registration threshold is exceeded. For non-resident persons, different mandatory registration rules are applicable. A non-resident is not required to charge VAT on supplies made to taxable resident customers in Saudi Arabia, as such customers will self-account for VAT using the reverse charge mechanism. However, a non- resident must register once they make any supplies for which they are required to charge and pay VAT, regardless of value (such as supplies made to a person not registered for VAT purposes)(7). (5) Article 23 (2), Implementing Regulations of VAT Law, and Article 19 of the Unified Agreement for VAT of the Cooperation Council for the Arab States of the Gulf. (6) Article 3, Implementing Regulations of VAT Law.