Saudi Arabia has begun accepting applications for value-added tax (VAT) refunds on eligible real estate transactions conducted by individuals between Jan. 1, 2018, and Oct. 4, 2020.
The General Secretariat of the Zakat, Tax and Customs Committees (GSTC) announced that applications must be filed within 30 days of the relevant procedures being published in the Official Gazette on Oct. 13.
The initiative could involve refunds worth several billion Saudi riyals, according to Deloitte, although eligibility will depend on specific conditions and supporting
documentation.
VAT Refund Eligibility and Potential Value
To qualify, the property transaction must have been conducted by an individual who paid the VAT to the Zakat, Tax and Customs Authority (ZATCA). Applicants must also demonstrate that they were not engaged in regular property sales as a commercial, income-generating activity.
Individuals whose multiple property transactions exceeded the mandatory VAT registration threshold within any consecutive 12-month period will be excluded.
Michael Camberon, Deloitte Middle East’s indirect tax services leader, estimated that eligible refunds could total several billion riyals. Saudi Arabia recorded more than 255,000 residential property transactions in 2020, with average values ranging from SAR 250,000 to SAR 900,000 for houses, apartments and villas. Land transactions averaged approximately SAR 820,000.
Camberon expects the overall economic impact to remain limited due to the time elapsed since the transactions and the short application window. However, refunds could improve individual liquidity and support property market activity if reinvested in real estate.
Documentation and Processing Challenges
Applicants must provide evidence of property sales, VAT payments, penalties and relevant tax returns. Retrieving records for older transactions, establishing the nature of repeated sales and accounting for previous input tax deductions could complicate the process.
Incomplete documentation or disagreements over eligibility may also lead to disputes.
Buyers May Have Legal Claims Against Sellers
The refund initiative also raises questions about who ultimately receives the money. Lawyer Abdullah Al-Baradi said sellers receiving VAT refunds may be required to return the amounts to buyers who originally bore the tax as part of the purchase price.
Under Article 144 of Saudi Arabia’s Civil Transactions Law, buyers may pursue claims for unjust enrichment if sellers retain refunds without lawful grounds.
Furthermore, Article 120 allows compensation claims where a seller’s failure to apply within the deadline causes financial harm to the buyer. Such claims would require proof of fault, damage and a causal connection.
The official refund application, however, must be submitted by the eligible individual who originally remitted the VAT to ZATCA.
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