KSA Land Tax

Land Tax

Research & Advisory Department

An Initiative Towards Market Correction

KSA

2 | Land Tax on Unused Urban Land in KSA

The Unused Urban Land or a.k.a the “White Land” is a key driving force in meeting the growing housing demand in Kingdom of Saudi Arabia. In other words, these big land parcels can be used in order to meet the housing shortages for around 20 million Saudi nationals, who are currently residing in rented accommodation.

There are no property taxes in Saudi Arabia However based on the official Saudi Press Agency (SPA), the Shura Council agreed to impose an annual fee on ‘white lands’. The Council agreed that Ministry of Municipal and Rural Affairs will be in charge to issue the implementing regulations to control and organise the necessary mechanism to impose annual fees on such land that is located within the white urban scale.

Background story• At the end of last Year, The International Monetary Fund (IMF) advised Saudi Arabia to implement a tax on vacant lands as a way to increase non-oil revenues.

• March 23, 2015 - a plan approved by Government of KSA to impose a tax on undeveloped land in urban areas

• Proposal submitted by: Newly formed Council for Economic and Development Affairs.

• Rate for the tax and the time frame for implementation not decided.

Land Tax on Unused Urban Land in KSA

The Concept & Idea Property Taxes in KSA


Why there is a need for such a Tax?

Fewer players trying to manipulate the KSA Land market i.e. vast areas of prime real estate being stockpiled by wealthy individuals and companies with no intention of developing the land but simply holding onto the land as a store of value and/or aiming to resell it at a profit.

High demand for affordable housing is on the rise in KSA as about 20 million citizens do not own their own homes, a high ratio for a rich country. Rising rents make it hard for even the middle class to afford housing; many Saudis do not meet qualifications for housing loans from banks.

The New Mortgage law needs a strong push as this new Land tax regime will help to implement it in a better way both for the policy makers and financial institutions.

Who are the Key Stakeholders?

• Land Owners/Investors• Land Appraisers/Chartered Surveyors • Buyers of property• Saudi Government • Real Estate Developers/Consultants• Banks and financial Institutions• Construction companies• Revenue/Tax collectors• Policy Makers• Accountants

• This will help to boost the new mortgage law being implemented as Banks will target the land owners and use their land as 30% equity to finance their mortgage. This will positively impact the banks business.

• The new Tax will force the land owners to sell their respective land and this will increase the overall supply of land in the KSA market.

• The Demand & Supply will be narrowed down as increased supply will help to boost the current housing projects in pipeline and will provide room for new ones.

• This will also help to develop a more active real estate market in KSA as key property developers will actively get involve in starting new projects and hence increasing the overall real estate transactions by value and numbers.

How this Tax will Impact?

• The affordable housing project in the KSA market will get a big push in two ways: 1- Firstly, more supply of Land in the market to build housing units.

2- Secondly, cost of land is a major constraint in any construction project.Hence as a result of land tax the land price is more likely to move downward.

Positive Impacts:

• The introduction of such a tax will make the land trading market more regulated as sellers won’t be able to hold the land for a longer as they will be subject to tax.

• More supply of land in the market is most likely to impact the land prices and will trigger them down.



Key Questions that need to be addressed

4. Will there be a time limit that will apply before tax is levied on the land owner?

5. What tax rates to apply?

6. Will there be a separate taxation criteria for individuals and companies. For example:

• The tax rates

• Period of ownership

• Minimum value

• Maximum value

7. Whether it will be fair just to tax the owner of the land and not the buyer?

1. How would you classify an unused land? What are the criteria ?

2. Should all unused lands be taxed as the same under the land tax regime?

3. Will there be minimum value criteria from which the tax would start to apply.

• Exempt value (if any)

• Taxable value



CorporationsCountries Real Property Tax Stamp Duty Transfer Tax Other

Bahrain No

Stamp duty is levied on property transfers on the basis of the value of the

property as follows: 1.5% up to BHD; 70,000; 2% from

BHD 70,001 to BHD 120,000; and 3% for amounts

exceeding BHD 120,001.

No No

Kuwait No No No No

Oman No No No No

Qatar No No No No

UAE No No

A transfer charge is levied on the transfer of real

property. The rate varies according to the local

jurisdiction.

Municipal taxes are imposed on certain hotel

and leisure services and property rentals.

Annual rental income of residential &Commercial tenants is taxed at 5% and 10%, respectively.

Saudi Arabia No No No No

IndividualCountries Real Property Tax Stamp Duty Transfer Tax Other

Bahrain No

Stamp duty is levied on property transfers on the basis of the value of the

property as follows: 1.5% up to BHD; 70,000; 2% from

BHD 70,001 to BHD 120,000; and 3% for amounts

exceeding BHD 120,001.

No No

Kuwait No No No No

Oman No

Stamp duty applies only to the acquisition of real

estate at the rate of 3% of the sales value.

No No

Qatar No No No No

UAE No No

A transfer charge is levied on the transfer of real

property. The rate varies according to the local

jurisdiction.

No

Saudi Arabia No No No No

Overview of Property Tax Regimes in GCC Countries

We did not find any direct evidence of direct property taxes and or land taxes in the GCC countries. The only type of taxes that are being imposed by the respective governments are on buying and selling of property.


However, based on our further research and investigtion we managed to find a direct evidence of land tax in Australia. The Oceanian country comprises of six states namely: New South Wales (NSW), Queensland (QLD), South Australia (SA), Tasmania (TAS), Victoria(VIC) and Western Australia (WA) and two major mainland territories — the Australian Capital Territory (ACT) and the Northern Territory (NT). Each of the afore-mentioned states and territories has a proper system of tax of its own.

Land taxes and frequency of payment are determined by local councils. Each council has land valuers who value the land’s worth. The land’s worth is the value of the land only; it does not include existing dwellings on the property. The assessed value of the land determines the total charges of rates.

In this article we will discuss the Land tax system prevailing in Queensland, Australia.

Queensland, AustraliaLand tax is a state tax, calculated on the freehold land you own in Queensland at midnight on 30 June each year. For example, the land tax liability

for the 2013–14 financial year was calculated on 30 June 2013.

The tax rate that applies depends on • What type of owner you are• The total taxable value of your land, and if any exemptions apply

Land Categories:Land in Queensland is categorised as freehold, leasehold or state-owned. Land tax is a tax on freehold land, which includes:

• vacant land• land that is built on• lots in building unit plans• lots in group title plans• lots in a timeshare scheme• lots owned by a home unit company

Shared ownership of land:If you own land jointly with other people, the taxable value of the land will be based on your respective shares. They will then add this to the value of all other land that you own to determine the total taxable value.

Assessment of Land Tax:Land tax is assessed (or calculated) on the total taxable value of an owner’s Queensland freehold land.They will add up the taxable value of all land that you own in Queensland at 30 June, excluding land on which you have received an exemption.

Different rates apply depending on this total value and what type of owner you are. You are liable when the total taxable value of your land is:

• $350,000 or more - for companies, trustees or absentees.

• $600,000 or more - for individuals.

Reassessments of your land tax can happen when certain events occur, which may increase or decrease your liability.

CASE STUDY - Land Tax


ExampleTotal taxable value of $680,000 Tax band is $600,000–$999,999.Tax calculation = $500 + (1 cent × $80,000 excess) = $500 + $800Tax payable = $1,300

If you don’t reside in Australia, the company, trustee and absentee land tax rates will apply.

Taxable value Rate of tax

$0–$599,999 $0

$600,000–$999,999 $500 plus 1 cent for each $ more than $600,000

$1,000,000–$2,999,999 $4,500 plus 1.65 cents for each $ more than $1,000,000


$5,000,000 and over $62,500 plus 1.75 cents for each $ more than $5,000,000

Land Tax RatesIndividualAn individual (a person who usually resides in Australia) is liable for land tax if the total taxable value of their land is $600,000 or more.

If you don’t reside in Australia, the company, trustee and absentee land tax rates will apply.

Taxable value Rate of tax

$0–$599,999 $0

$600,000–$999,999 $500 plus 1 cent for each $ more than $600,000



$5,000,000 and over $62,500 plus 1.75 cents for each $ more than $5,000,000

ExampleTotal taxable value of $680,000Tax band is $350,000–$2,249,999.Tax calculation = $1,450 + (1.7 cents × $330,000 excess)= $1,450 + $5,610Tax payable = $7,060

Companies, Trustees, and AbsenteesA company, trust or absentee (a person who does not ordinarily reside in Australia) is liable for land tax if the total taxable value of their land is $350,000 or more.

***(Source: Office of State Revenue, Queensland Government website: https://www.osr.qld.gov.au)

(Disclaimer: The below information has been extracted from the Office of State Revenue, Queensland Government website: https://www.osr.qld.gov.au. The below information has only been

used for illustration purposes. This Information mentioned below is by no means the opinion of Century21 Saudi or its employees. This article should not be used for making any kind of

investment decisions. Century21 Saudi does not accept any liability in negligence or otherwise for any loss or damage suffered by any party resulting from reliance on the infromation. Thank you).


Residential Lands Stats (Q1 – 2015)

Taxable value Riyadh Jeddah Madinah Makkah Damman/Khobar

Number of Transactions 10,567 5,637 2,357 3,026 2,806

Total Value of Transactions (SR) 10,861,803,903 8,855,330,436 3,044,988,588 11,598,547,159 4,365,820,624

Total Transacted Area (sqm) 31,053,956 5,544,030 7,506,590 10,828,544 3,241,015

Commercial Lands Stats (Q1 – 2015)

Taxable value Riyadh Jeddah Madinah Makkah Damman/Khobar

Number of Transactions 1,262 671 398 367 467

Total Value of Transactions (SR) 12,024,628,101 3,522,460,042 1,492,713,707 1,453,102,060 3,168,333,988

Total Transacted Area (sqm) 11,647,696 3,881,119 523,760 323,750 3,130,399

Riyadh Jeddah Madinah Makkah Damman/Khobar Number of Transac:ons 1,262 671 398 367 467

Total Value of Transac:ons (SR) 12,024,628,101 3,522,460,042 1,492,713,707 1,453,102,060 3,168,333,988


Commercial Lands - Total No. of Transactions vs Total Value of Transactions (SR) (Q1 - 2015)

Tota

l Val

ue (S

R)

0

3,500,000,000

7,000,000,000

10,500,000,000

14,000,000,000

Tota

l No.

of

Tran

sact

ions

0

325

650

975

1,300

Riyadh Jeddah Madinah Makkah Damman/Khobar

Number of Transactions Total Value of Transactions (SR)

Riyadh Jeddah Madinah Makkah Damman/Khobar Number of Transac:ons 10,567 5,637 2,357 3,026 2,806



Residential Lands - Total Value of Transactions (SR) vs Total Transacted Area (Sqm) (Q1 - 2015)

Tota

l Are

a (S

qm

)

0

10,000,000

20,000,000

30,000,000

40,000,000

Tota

l Val

ue

(SR

)

0

3,000,000,000

6,000,000,000

9,000,000,000

12,000,000,000


Total Value of Transactions (SR) Total Transacted Area (sqm)

Riyadh Jeddah Madinah Makkah Damman/Khobar Number of Transac:ons 10,567 5,637 2,357 3,026 2,806



Residential Lands - Total No. of Transactions vs Total Value of Transactions (SR) (Q1 - 2015)

Tota

l Val

ue

(SR

)

0

3,000,000,000

6,000,000,000

9,000,000,000

12,000,000,000

Tota

l No.

of

Tran

sact

ion

s

0

2,750

5,500

8,250

11,000


Number of Transactions Total Value of Transactions (SR)

Riyadh Jeddah Madinah Makkah Damman/Khobar Number of Transac:ons 1,262 671 398 367 467



Commercial Lands - Total Value of Transactions (SR) vs Total Transacted Area (Sqm) (Q1 - 2015)

Tota

l Are

a (S

qm)

0

3,000,000

6,000,000

9,000,000

12,000,000

Tota

l Val

ue (S

R)

0

3,500,000,000

7,000,000,000

10,500,000,000

14,000,000,000


Total Value of Transactions (SR) Total Transacted Area (sqm)

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[email protected]

Mobile: 0558 199 194

Asif Iqbal

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Mobile: 0555 177 076

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[email protected]

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Mobile: 0555 194 919

Disclaimer

In order to prepare this report, Century21 Saudi collected the data from outside sources as well as by survey of Century21 Saudi research team. Century21 Saudi is confident about the reliability of published data. However, we do not guarantee the completeness and accuracy of the data.

This report is prepared for information only. The assessments and values articulated in this report are subject to change without any notice. Therefore, no invest-ment decision should be made based on the information presented in this report. Century21 Saudi will not be responsible for any loss that may be sustained as a result of the information enclosed in this report.

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KSA Land Tax

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