The Kingdom's ten per cent on disposition is priced at entry.

The 2025 Law of Real Estate Ownership by Non-Saudis, Royal Decree M/14 of 1447H, opened ownership to foreign persons, companies, funds and special purpose vehicles within defined areas, and it attached a charge to their dispositions. The real estate transaction tax of five per cent applies to every disposition of real estate in the Kingdom, by anybody. The law adds a further charge on non-Saudi ownership not exceeding five per cent, so that a disposition by a non-Saudi owner carries a total of up to ten per cent of the value of the right disposed of. Beside it sit the law's penalties: up to five per cent of the right's value for breach, capped at ten million riyals, and for misleading information up to ten million riyals together with a forced sale of the property by auction. The charge is the price of the opening, and a structure that did not price it at entry has written a return it cannot earn.

This note sets out what the charge is and how it is composed, what ten per cent of exit value does to a development return, the five documents the charge reaches, the holder that carries it and the holders that may not, the share sale and the question it does not answer, the contribution and the valuation, the registry's date, the penalties and what they reach, a comparison of the exit routes under the charge, a worked return as a type, cases, what each party holds, the sequence, questions, terms and what to read.

The charge, composed

The real estate transaction tax is a tax on the disposition of real estate, at five per cent of the value, collected at the point of registration. It predates the 2025 law and applies to Saudi and non-Saudi owners alike, with the exemptions its own rules provide. The 2025 law's additional charge applies to non-Saudi ownership, at a rate not exceeding five per cent, set by the executive within that ceiling. The two together are the ten per cent, and the second is the part the 2025 opening added. The charge falls on the disposition of the right: a sale of freehold, an assignment of a usufruct, and in the readings Saudi counsel gives on the day, the transfer of a right in substance by whatever form.

What ten per cent does to a return

A development return is the difference between entry and exit. A charge of a tenth of the exit value, falling on the seller, cannot be recovered from the buyer, who prices the asset on what it is worth and not on what the seller's charge is; a seller who tries to pass it on has a buyer who walks to a Saudi seller. It cannot be deferred, because it falls at the registry's date and the registry will not record without it. It cannot be spread, because it is a charge on the disposition and not on the gain. It can be absorbed in one place only, the price paid at entry, and a structure that did not absorb it there has written a return the fund will not receive.

The arithmetic is stark on a development. A parcel bought at one price, developed at a cost, and sold at a value that is the sum of both plus a margin, loses a tenth of the whole exit value, not a tenth of the margin. On a margin of a fifth of exit value, the charge is half the margin. On a margin of a tenth, the charge is the margin.

The five documents

The exposure statement writes the net-of-charge exit into the programme and says, for each market, what it costs to move. A platform with parcels in three states carries three exit costs, and the Kingdom's is the largest.

The valuation provisions state whether the net asset value is struck before or after the charge a sale would bear. A valuation that ignores the charge overstates every holder's position until the day of sale, and a manager's share calculated on that valuation is calculated on money the fund will not receive. The valuer's instruction names the charge as a deduction.

The waterfall calculates the manager's share on realised value after the charge, and the developer's promote beneath the platform on the same basis. A promote calculated on gross exit value is a promote paid on the State's money.

The exit test runs each route out against the registry's date, because a disposition is complete when the registry records it and the charge falls then. A sale agreed in one year and recorded in the next is charged in the next, at the rate then in force.

The contribution agreement, where a landowner contributes a parcel for units: a contribution is a disposition by the owner to the platform's vehicle, and whether the charge falls on it, on whom and at what value is a question the tax adviser answers in its own name before the valuation is agreed, because a charge on the way in changes the owner's price.

The holder that carries it

The charge falls on non-Saudi ownership. A structure with a Saudi holder in the chain, where the category permits one, bears a different position: the transaction tax and not the additional charge, on the readings Saudi counsel gives. A structure whose platform is a Saudi private real estate fund under the Capital Market Authority's regulations, with non-Saudi unitholders, bears the position the fund regulations and the ownership law together give that fund, which is read against the 2025 law's express inclusion of funds with non-Saudi holders among non-Saudi owners. A Saudi company with non-Saudi shareholders is a non-Saudi owner under the law's own list. Which holder the chain uses is a category question, read in the holding room, and the charge is one of the three things that differ at every border: who may hold, what it costs to move, and what the value event is.

Why the charge was attached to the opening

The 2025 law opened Saudi real estate to foreign owners more widely than the 2000 law it repealed, and it attached a charge to their dispositions at the same time. The two are one policy: the Kingdom wants foreign capital in its real estate, within areas and percentages it chooses, and it wants a share of the gain that capital makes when it leaves. The additional charge is the share, and its ceiling of five per cent beside the five per cent transaction tax is the price of access. A manager who reads the charge as a penalty has misread it; it is the term on which the door was opened, and a structure that accepts the term and prices it is the structure the law was written for.

The charge also shapes the market in a way a manager reads. A non-Saudi seller bears a tenth and a Saudi seller bears a twentieth, so a Saudi buyer of a non-Saudi's parcel is buying an asset the seller can sell to a Saudi competitor at a price that reflects the difference. Over a holding the charge favours longer holds and larger value events, because the charge is on the exit value and not on the number of exits; a platform that exits parcel by parcel bears the charge on each, and a platform that exits the portfolio whole bears it once on the whole.

The valuer's instruction, drafted

The valuer is instructed in writing, under the constitution, and the instruction on a Saudi parcel carries the charge. It names the basis: market value on the standards the tier recognises, with development land on a residual basis. It names the deduction: the charge a disposition by the vehicle would bear on the day, at the rate in force, on the value found. It names the assumption about the holder: that the vehicle is a non-Saudi owner for the law's purpose, or that it is not, on the adviser's opinion. And it requires the report to show the gross value, the charge and the net, so that the committee reads the deduction and not only the result. A valuation struck on that instruction is a valuation the register can test, and a manager's share accrued on it is accrued on what a sale would deliver.

The developer's promote under the charge

A developer beneath a Saudi platform holds a promote on the parcel it builds, and the promote is calculated on realisation. The joint venture waterfall runs after the charge: the parcel company's sale proceeds, less the charge at the registry, less the facility, less the developer's costs, and then the hurdle and the promote. A joint venture agreement that calculates the promote on gross sale proceeds has given the developer a share of the State's charge, and the platform's own waterfall, running after the joint venture's, receives less than the model showed. The agreement names the charge as a deduction before the promote, in terms.

The lender under the charge

A construction lender to a Saudi parcel company sizes its facility on the parcel's exit value, and a lender that has read the charge sizes on the net value. A facility sized on the gross value is over-advanced by a tenth at exit, and the lender's loan-to-value covenant is tested on a valuation that, if struck gross, hides the over-advance until the sale. Lenders in the Kingdom read the charge; lenders from elsewhere sometimes do not, and a manager whose lender has sized on gross value has a covenant breach waiting at the registry.

Where it surfaces

At the first valuation day, when the net asset value is struck gross and the register is shown a number a tenth too high.

At the manager's share, accrued on the gross valuation and paid on a realisation that bears the charge.

At the share sale, when Saudi counsel's reading on the day differs from the model's assumption.

At the contribution, when the owner learns the charge falls on it and the units were priced without it.

At the registry, when the sale signed in one year records in the next at a rate that has moved.

At the lender's covenant, when the over-advance on a gross sizing is discovered at the sale.

The cost of getting it wrong

The charge unpriced costs a tenth of exit value out of the margin, a manager's share accrued on money never received and clawed back from individuals, a developer's promote paid on the State's money, a lender's over-advance and, at worst, a penalty and a forced sale where the information given to the registry was wrong. Pricing it costs a line in the residual, a sentence in the valuer's instruction, a clause in each waterfall and a reading by Saudi counsel. The structure paper carries the comparison.

The share sale

A sale of the parcel company's shares rather than the parcel is the structure managers reach for first, on the footing that a transfer of shares is not a disposition of real estate. The footing is not secure. The transaction tax's own rules address the transfer of shares in a company whose value is real estate, and the 2025 law's charge is read by Saudi counsel against the substance of what is disposed of. A structure built on the assumption that a share sale escapes the charge has built on an assumption, and the buyer's counsel reads the same instruments and prices the same uncertainty. The position is taken, if it is taken, on Saudi counsel's opinion in its own name, on the day, and the exit test carries both readings.

The contribution and the valuation

A landowner contributing a parcel to a platform's vehicle disposes of it, and the charge's treatment of the contribution is read before the valuation is agreed: whether the transaction tax applies to a contribution in kind, whether the additional charge applies where the contributing owner is Saudi and the receiving vehicle is a non-Saudi owner, and at what value. The answer changes the owner's price, because an owner who bears a charge on contribution wants units worth more, and the cash investors who fund the platform want the charge priced so that the valuation is net of it. The adviser's opinion sits beside the contribution agreement.

The registry's date

The charge falls at the registry, on the recording of the disposition, at the rate in force on that day. The exit test therefore runs to the registry's date and not to the signing: the registry's documents, its notarisation, its queue and its own calendar are inside the exit's timetable, and a sale that signs in one year and records in the next bears the next year's rate. Saudi counsel reads the registry's practice for the recording period, and the structure paper carries it.

The penalties

The 2025 law's penalties reach breaches of the ownership regime: ownership outside the permitted areas or above the permitted percentages, failure to register, and misleading information in the registration. The penalty for breach is up to five per cent of the right's value, capped at ten million riyals. The penalty for misleading information is up to ten million riyals together with a forced sale of the property by auction, which is the loss of the asset at an auction price. A structure that holds within the categories, within the areas, at the permitted percentage, registered, with accurate information, faces neither; one that holds on an assumption faces both.

By exit route · by charge	What is disposed of	Charge borne	Who bears it	The registry's date
Sale of the parcel by a non-Saudi owner	The real estate	Transaction tax plus the additional charge, up to ten per cent	The seller	On recording
Sale of the parcel by a Saudi owner	The real estate	Transaction tax	The seller	On recording
Sale of the parcel company's shares	Shares; the substance read by counsel	The transaction tax's share rules and counsel's reading of the additional charge	The seller, on the reading	On the share transfer, and any registry recording
Contribution of a parcel for units	The real estate, in kind	As the adviser opines, on the contributor's and the vehicle's status	The contributor or the vehicle, as priced	On recording
Assignment of a usufruct	The in-rem right	As for a disposition	The assignor	On recording

A timeline, as a type

Month one: the parcel is identified; Saudi counsel reads the charge for the vehicle's category and the share-sale position; the tax adviser reads the contribution, where there is one. Month two: the residual is struck on the net exit value; the price is agreed. Month three: the valuer is instructed with the deduction; the waterfalls, platform and joint venture, name the charge before any share or promote. Month four: the acquisition, registered. Year one: the first valuation day; gross, charge and net shown. Year three: a consent lands; the valuation rises; the charge rises with it, and the report shows both. Year five: the exit; the sale signed in the fourth quarter and recorded in the first of the next year at the rate then in force, which the exit test anticipated; the charge paid at the registry; the waterfalls run on the net; the register receives the margin the model showed.

The structure paper's page

The structure paper's page on the charge carries: the rate in force and the watching brief; the holder's category and the charge it bears on the adviser's opinion; the deduction in the residual at entry; the valuer's instruction; the clause in each waterfall; the share-sale reading and the contribution reading, each in counsel's name; the registry's recording period; and the exit test's routes with the charge on each. The page is what the committee reads when it asks why the valuation is net, what the lender reads when it sizes, and what the buyer reads when it prices.

Reading the charge beside the other borders

The Kingdom's charge is the largest of the three states' costs of moving, and the comparison is part of the exposure statement. Qatar's registration regime charges a transfer at its own rate; Kuwait's at its own; India's stamp duty by state at rates that vary widely. A platform with parcels in several states carries a table of the cost of moving in each, and the exit policy is written with the table in view: a portfolio-whole sale bears each state's charge on each parcel's share, and a parcel-by-parcel exit bears them in sequence. The Kingdom's ten per cent is the line on the table that most often decides whether a Saudi parcel is held or developed and sold, because a hold-and-let programme bears it once at the end and a develop-and-sell programme bears it at each sale.

The committee's question

The investors' committee asks one question about the charge at the first valuation day: is the number net. A manager who can show the valuer's instruction, the gross, the charge and the net has answered it. A manager who cannot has a committee that now reads every valuation for the deduction, and a register that discounts the net asset value by a tenth itself, which is worse than the manager having done it, because the register's discount is applied to everything and not only to the Saudi parcels.

A return, as a type

A platform buys an entitled parcel in a permitted area of Riyadh. The residual valuation at entry assumes an exit value, a development cost and a margin of a fifth of exit value. The structure prices the charge at entry: the exit value is reduced by a tenth for the charge before the residual is struck, and the price paid is the residual on the net figure. The valuer is instructed to strike net asset value net of the charge a sale would bear. The waterfall calculates the manager's share and the developer's promote on realised value after the charge. The exit test runs the sale to the registry's date. At exit, the parcel sells at the assumed value, the charge is paid at the registry, and the fund's realised gain is the margin the model assumed, because the model assumed the charge.

The same platform with the charge unpriced: the price paid is the residual on the gross figure, which is a tenth of exit value too high; the net asset values through the life overstate each holder's position; the manager's share accrues on the overstatement; at exit the charge removes half the margin, and the realised gain is half what the register was shown.

Four cases, as types

A platform buys an entitled parcel in a permitted area of Riyadh at a price set by a residual valuation that assumed a clean exit. The exit bears the charge; the residual did not; the realised gain is a tenth of exit value lower than the model, and the manager's share, calculated on the model's valuation at the last valuation day, has already accrued on money the fund never received.

A platform structures its exit as a sale of the parcel company's shares on the footing that a share sale escapes the charge. Saudi counsel, asked on the day, reads the charge as reaching a disposition of the right in substance and the transaction tax's share rules as applying. The buyer's counsel reads it the same way and prices accordingly, and the platform's model, which assumed the escape, is wrong by the charge.

A landowner contributes a parcel to a platform at a valuation agreed without the adviser's reading of the charge on contribution. The charge falls on the contribution; the owner, who bears it, wants units worth more; the cash investors refuse; the seed is renegotiated after the first close.

A platform prices the charge into every acquisition, instructs the valuer to strike net asset value net of the charge, calculates every share on realised value after it, reads the share-sale position with Saudi counsel before relying on it, and runs the exit test to the registry's date. The return in the model is the return the fund earns, and the register was shown the right number from the first valuation day.

What each party holds

The manager holds the pricing of the charge into every entry, the valuer's instruction, the waterfall's basis and the exit test's registry date.

Saudi counsel holds the reading of the charge on each route, the share sale, the contribution and the registry's practice.

The tax adviser holds the opinion on the contribution and on the holder's category, in its own name.

The valuer holds the net-of-charge instruction.

The administrator holds the waterfall calculated after the charge.

The register holds a net asset value that reflects what a sale would bear.

The sequence

1. The charge is priced into the entry price of every Saudi parcel, by reducing the assumed exit value before the residual is struck.
2. The net-of-charge basis is written into the exposure statement, the valuation provisions, the valuer's instruction and the waterfall.
3. The charge's treatment of a share sale and of a contribution is read with Saudi counsel and the tax adviser before either is relied on.
4. Every exit route is run to the registry's date in the exit test.
5. The holder's category is read for which charge it bears.
6. The registration and the information given are kept accurate, against the penalties.

Questions a manager asks

Is the additional charge always five per cent. The law caps it at five; the rate within the cap is set by the executive, and the structure carries the rate in force and a watching brief on it.

Can the buyer be made to bear it. A buyer prices the asset on its value; a seller who asks the buyer to bear the seller's charge is asking for a higher price, which the buyer compares with a Saudi seller's.

Does a share sale avoid it. The position is read by Saudi counsel on the day against the transaction tax's share rules and the law's substance, and the exit test carries both readings; a model that assumes the escape has assumed.

Does the charge apply to a Saudi private real estate fund with non-Saudi unitholders. The law lists funds with non-Saudi holders among non-Saudi owners, and the fund regulations are read beside it; the adviser opines.

What about a contribution in kind. A disposition by the contributor, read by the adviser for the tax and the charge before the valuation is agreed.

When is it paid. At the registry, on recording, at the rate in force that day; the exit test runs to that date.

Terms used

Real estate transaction tax: the five per cent tax on dispositions of real estate in the Kingdom.

Additional charge: the 2025 law's charge on non-Saudi ownership, not exceeding five per cent, on disposition.

Disposition: the transfer of a right in real estate, recorded at the registry.

Residual valuation: the value of development land derived from the completed scheme's value less costs and margin.

Net of charge: a valuation or a waterfall calculated after deducting the charge a sale would bear.

Registry's date: the day the registry records the disposition, on which the charge falls.

What to read

Royal Decree M/14 of 1447H on the disposition charge, the penalties and the registration requirement; the real estate transaction tax rules, including their treatment of shares in real estate companies; the Real Estate General Authority's guidance; the Capital Market Authority's real estate fund regulations for a fund as holder. On this site, the Kingdom's holding and exit rooms in the onshore interfaces and the platform room on the Land door.