Saudi Arabia: The Saudi Arabian White Land Tax Law

Last Updated: 15 August 2016
Article by Zaid Mahayni

1. Introduction

Pursuant to Royal Decree No. M/4 dated 24 November 2015 and to Council of Ministers Decision No. 377 dated 13 June 2016, the Saudi Arabian legislator issued the White Land Tax Law (the "Law") and its implementing regulations (the "Regulations").

The governmental authority vested with the application and enforcement of the Law and the Regulations is the Ministry of Housing.

2. Objectives Sought

The objectives of the Law are trifold:

  1. increasing the supply of developed land in order to better address shortages;
  2. making residential land available at reasonable prices; and
  3. protecting competition and combatting monopolistic practices.

3. Definition of White Land

Both the Law and the Regulations define 'white land' as vacant land located in 'populated areas', zoned for residential or for dual residential and commercial use. Populated areas are in turn defined by way of maps delineating their boundaries.

According to the Regulations, the Tax will be gradually imposed and therefore white land falling in populated areas might not all necessarily be subject to imposition at once.

4. Value of the Tax

The Law imposes on taxable land an annual tax equivalent to 2.5% of its value (the "Tax").

5. Tax Applicability

According to the Law, the Tax is only applicable to individuals and private-sector legal entities. Public entities are hence excluded.

6. Land Valuation

Land valuation is performed by the Ministry of Housing. According to the Regulations, the valuation of taxable land shall be based on a number of factors, including the location of the land within populated areas, its zonage, its surface condition, applicable building requirements, the availability and accessibility of infrastructure services (e.g. water, sewage, electricity, and telephone) and general neighboring services (e.g. educational, health, religious, and security services).

7. Committees

The Law requires the Minister of Housing to establish at least one committee (the "Sanctions and Objections Committee") for the purposes of:

  1. investigating violations of the Law and imposing the appropriate penalties; and
  2. considering any objections submitted in respect of any assessments.

The Sanctions and Objections Committee must be composed of three members. The Sanctions and Objections Committee must include at least one attorney and one technical specialist. Decisions of the Sanctions and Objections Committee may be appealed to the administrative court of competence.

The Regulations also require that a committee be formed for the valuation of property. Such committee must include at least one licensed valuator.

8. Communication with Owners of White Land

The Law requires owners of taxable land to approach the Ministry with all documents relating to their land within six months from the Ministry's public announcement to do so. Public announcements must be made through at least two daily newspapers and on the website of the Ministry of Housing.

The Ministry of Housing then proceeds to the valuation of each land and presents to each taxpayer an assessment detailing the amount of payable Tax. Taxpayers may object to the assessment by way of application to the Sanctions and Objections Committee, within 60 days from being notified of the assessment. The Sanctions and Objections Committee must decide on the objection within 60 days from its submission. Failure to issue a decision within such timeframe is deemed as a rejection of the objection.

The Tax must be paid within one year from the date of the assessment. However, if the land is developed within this one-year period, the landowner may be exonerated from the payment of the Tax. Exonerations may also be granted in case there exist inevitable impediments to the development of the land.

9. Joint Ownership

If a taxable land is jointly owned by more than one persons, each such person shall be responsible for part of the applicable taxes, in proportion to the ownership share of such person in the land.

10. Penalties

According to the Law, any violation of the Law is sanctioned by a penalty not exceeding the value of the tax owed.

11. Fairness

The Ministry must take measures to ensure that the Law is applied consistently and fairly in all regions and cities. It must also take measures to verify the information that it receives in respect of land.

12. Conclusion

When plans to implement a law regulating white land were announced, real estate development saw a surge. Now that the Law has been issued and that the Regulations are in place, it is expected that the Saudi Arabian Government will be better equipped to address shortages in the supply of residential units.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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