Zakat, Tax and Customs Authority clarifies VAT exemptions for real estate transactions

The Zakat, Tax and Customs Authority has clarified the cases in which value-added tax (VAT) does not apply to real estate transactions conducted by individuals between January 1, 2018, and October 4, 2020, the date when the Real Estate Transaction Tax regulations came into effect, according to the mechanisms and procedures issued by Board Resolution No. (26-04-10) dated August 16, 2020.

The authority stated via its "Ask Zakat, Tax and Customs" account on the X platform that VAT is not due on real estate transactions by individuals during the specified period, provided it is proven that the individual was not regularly and continuously engaged in real estate sales for the purpose of generating income.

When is an individual considered engaged in real estate sales?

The authority indicated that an individual is considered to be engaged in real estate sales if they conduct more than one real estate transaction within any consecutive 12-month period. VAT becomes due if the total value of these transactions exceeds the mandatory VAT registration threshold.

The mandatory registration threshold was 1 million riyals (SAR) in 2018, or 375,000 riyals from 2019 onwards, in accordance with the Unified VAT Agreement for the Gulf Cooperation Council (GCC) States.

How to claim a refund for undue VAT

The authority explained that if an individual has previously paid VAT that was not due on a real estate transaction, and has not already claimed input tax deductions related to the property in question, they may file a claim for a refund with the Committees for Adjudication of Zakat, Tax and Customs Violations and Disputes.

For information on the procedures and requirements for filing a claim, the authority advised contacting the General Secretariat of the Zakat, Tax and Customs Committees via their X account @CareGstc, or by calling 8001220000.