Foreign Property Buyers: New Tax Considerations

Saudi Arabia has introduced new regulations allowing foreign investors to purchase property, signaling a significant shift in its real estate market. The Real Estate General Authority will identify eligible areas, with Riyadh and Jeddah expected to be key locations. Detailed regulations will be released within six months via the 'Istitlaa' platform for public consultation. This move is anticipated to attract two main types of foreign investors: those with GCC-based businesses seeking a permanent base and those seeking high-return investment opportunities.

Foreign investors generally need a valid residency permit (Iqama) to purchase residential property. However, under the 2025 reforms, non-resident foreign investors can acquire property in Vision 2030 mega-projects like NEOM and the Red Sea Project, provided they meet investment thresholds. Restrictions include a limit of one residential property per individual and a ban on purchasing undeveloped land for speculation. Investors can acquire plots in Special Economic Zones, such as NEOM, for developments costing SR30 million or more, which must be completed within five years.

Key tax considerations include a 5% Real Estate Transaction Tax, a 2.5% White Land Tax, and a 15% VAT on commercial leases. Property transfers must be formalized with the authorities, with registration fees typically around 1% of the property value. Saudi Arabia's Special Economic Zones and large-scale development projects offer streamlined processes and potentially relaxed ownership conditions to encourage international investment.