Saudi Arabia scraps VAT for property deals

In a landmark move, Saudi Arabia has decided to exempt property deals in the kingdom from Value Added Tax (VAT).

A new tax of 5 per cent – the Real Estate Transaction Tax – will be levied though on property deals in place of the VAT.

However, in a relief for first time Saudi home buyers, they will be exempted from the new 5 per cent tax too for transactions of upto SAR1m.

The decision was made by way of a royal order issued by King Salman bin Abdulaziz Al Saud on October 1.

According to figures shared by the Saudi Arabian Monetary Authority (SAMA), the number of loans disbursed from January-August this year were over 22,000, a 78 per cent increase over the corresponding period last year when 12,039 loans were issued.

Royal Order Issued.https://t.co/HVUoJ7HWav#SPAGOV pic.twitter.com/JtQVBN7Co9

— SPAENG (@Spa_Eng) October 2, 2020

The combined value of the loans issued in first eight months of this year amounted to SAR10.1bn, up 94 per cent over the SAR5.2bn recorded last year over the same period.

Taking to Twitter, the Saudi Arabia’s Finance Minister, Mohammed Al-Jadaan, said that the new decree is aimed to support Saudis and help them own homes.

“It also contributes to the development of the kingdom’s economy by stimulating the residential and commercial real estate sector.”

In May, Saudi suspended an interest-free loan programme for military personnel which covers 20 per cent of a property, or up to SAR140,000 ($37,000). Another plan, which provided civilians with assistance up to SAR95,000, or 10 per cent of a property, was also paused.

Read: Saudi suspends two mortgage-support programmes amid crisis

In July, the kingdom tripled its VAT from 5 to 15 per cent as it took measures to offset the impact of the Covid-19 pandemic and the resulting low oil prices on its economy.