Foreign Buyer Taxes in Saudi Arabia: 5% RETT Plus a 2% Non-Saudi Fee

A foreigner buying an apartment in Riyadh in 2026 pays the state roughly 7% of the transaction value: 5% real estate transaction tax plus a 2% surcharge for non-Saudis in four cities. There is no annual property ownership tax in the Kingdom.

That is the key structural difference from European regimes: the burden sits entirely at the moment of transfer, not spread across years of ownership. Holding is cheap. Entering and exiting is expensive.

The updated foreign property ownership system took effect on 1 January 2026¹. Below are the exact rates, who is legally liable, and where investors commonly underestimate the real cost.

Quick Answer

• RETT (real estate transaction tax): 5% of the full transfer value, in force nationwide since 4 October 2020⁴, applying to Saudi and non-Saudi buyers alike¹.

• Additional 2% fee for non-Saudi individuals and foreign companies acquiring property rights in designated zones within Riyadh, Jeddah, Makkah and Madinah¹³.

• Roughly 7% combined transactional load in scenarios involving a foreign buyer²; some reporting describes the additional non-Saudi fee as running up to 5% in certain cases, which would push the total disposition charge toward 10%², so always confirm the applicable rate for the specific zone before signing.

• The seller remains legally liable for RETT, though the parties may agree to split the burden, and either side can physically remit the payment⁴.

• Ten transaction categories are exempt from the 2% fee: inheritance, court rulings, expropriation for public use, gifting, and others³.

• No annual tax on residential property ownership. A 15% VAT applies to certain commercial operations and services, not to a standard residential sale, which falls under RETT.

Scenarios and Options

Scenario 1: Buying an apartment in Riyadh to rent out. Budget for 5% RETT plus the 2% non-Saudi fee upfront, on top of agency commissions and registration costs. The upside: no annual residential property tax makes long-term holding cheap. The downside: the high entry cost eats nearly all of year-one yield.

Scenario 2: Buying outside the four listed cities. The 2% additional fee is tied specifically to designated zones in Riyadh, Jeddah, Makkah and Madinah¹; some frameworks also reference AlUla among zone-restricted areas⁴. Outside these zones, the transactional burden for a foreign buyer is lower. The trade-off: liquidity and rental demand outside the major hubs are not comparable, so a 2% saving rarely compensates for weaker exit liquidity.

Scenario 3: Holding through a foreign legal entity. The law allows foreign companies to own property required for their operations, such as offices, factories or warehouses, subject to sector regulator approval⁵. The 2% rule also extends to foreign companies³. A corporate structure brings reporting obligations, zakat, or corporate income tax exposure, which must be modeled before purchase, not after.

Scenario 4: Quick resale (flipping). The most exposed scenario. Transaction costs are paid twice, once on entry and once on exit. At a holding period under two years, price appreciation needs to exceed roughly 10-14% in combined costs across both transactions before any profit appears.

Comparison Table

Main Risks and Mistakes

Assuming only the seller pays the 5%. The law assigns liability to the seller⁴, but in practice the burden is often passed through in the price. Mitigation: fix the RETT split as a separate clause in the sale contract before signing.

Forgetting the 2% fee when modeling returns. Investors often budget the entry price alone and then get hit with a 7% bill on top. Mitigation: build the full transactional load into the model on both entry and exit.

Assuming the rules are uniform nationwide. The additional fee is tied to four cities¹, and the geographic zones where foreign ownership is permitted are separately defined by executive regulation⁵. Mitigation: verify the specific zone status before putting down a deposit.

Expecting an exemption 'by analogy'. The exemption list for the 2% fee is closed at ten categories³. Mitigation: request written confirmation that an exemption actually applies.

Ignoring the special status of Makkah and Madinah. Ownership in the holy cities has historically been the most restricted, and some rules there limit ownership to Muslims in designated areas¹. Mitigation: run a separate legal review before any transaction there.

Registering through a company without pricing the corporate load. Rental income inside a corporate wrapper is taxed differently than for an individual. Mitigation: compare scenarios with a local tax advisor before setting up the structure.

FAQ

How much total tax does a foreigner pay buying an apartment in Riyadh?

Roughly 7%: 5% RETT plus a 2% non-Saudi fee¹². On top of that, factor in agency commissions and registration costs.

Is there an annual property tax in Saudi Arabia?

No annual tax applies to residential property ownership. The burden is concentrated at the point of transaction.

Who is legally required to pay the 5% RETT?

The seller. The parties can agree to split the cost and either side may remit payment, but legal liability toward the tax authority stays with the seller⁴.

Which cities apply the additional 2% fee?

Riyadh, Jeddah, Makkah and Madinah¹³.

Can the 2% fee be avoided?

There are ten exempt transaction categories: inheritance, court rulings, expropriation for public use, gifting, and others³. A standard market purchase is not on that list.

Do foreign companies pay the same taxes as individuals?

The 2% rule also applies to foreign companies³. Corporate ownership additionally adds reporting requirements and its own income tax treatment.

When did the new rules take effect?

The updated foreign property ownership system has been in force since 1 January 2026¹. The executive regulation was approved by the Cabinet and defines the permitted ownership zones⁵.

Is rental income taxed?

Treatment depends on the recipient's status, non-resident individual, resident, or corporate entity². As of 2026, confirm the applicable rate with a local tax advisor before signing a lease.

Do I pay VAT when buying a home?

A standard ownership transfer is subject to RETT, not VAT. The 15% VAT rate applies to select commercial operations and related services.

Source: ZAWYA

Before putting down a deposit, rerun the deal model with the full transactional load of roughly 7% on entry and repeated costs on exit, and get it in writing who actually pays the 5% RETT.

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Sources (5)

This material was prepared with the help of artificial intelligence and checked by a person. Editorial responsibility: Housebook Investment LLC.