Various forms of tax have been implemented in the Kingdom over the past year – just look at the family tax, sin tax and expat tax. But the Kingdom’s value-added tax (VAT) executive regulations announced this week that residential real estate, leasing or licensing – excluding hotels – will be exempt from VAT.
About 4,000 new residential units entered the Riyadh property market at the end of last year. This was in an effort from Saudi Arabia’s government to increase the supply for housing in the Kingdom.
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Under the new regulations, residential real estate that is intended to be your primary residence will not be part of VAT.
In an effort to diversify the economy, the government wants to open the real estate market to smaller investors. So, if you’re looking to invest in some property you can rest easy that there will be no added extra cost.
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Saudi Arabia’s Tax Authority, General Authority of Zakat and Tax (GAZT) released a draft of the VAT implementing regulations and it also shows several other services and products that will be exempt from the implementation of VAT starting 1 January 2018.
Financial services will also be exempt from taxation. So, that means bank loans and any Islamic finance products will not have any VAT added to it.
VAT however will be charged at 0% on exports of goods and services outside the GCC region. So, cargo and passenger transportation services to and from the Kingdom by sea, land or air will have a tax added to it.