Saudi Arabia’s General Real Estate Authority has clarified that the 5% Real Estate Transaction Tax applies to every property transfer in the Kingdom, regardless of the buyer’s nationality. Non-Saudi buyers, however, face a second charge: an additional 2% fee when they acquire property inside designated geographic zones in Riyadh, Jeddah, Makkah and Madinah. The clarification came from REGA spokesperson Taisir Al-Mufarrij, who framed the layered levy as part of a wider zoning regime that opened Saudi real estate to foreign buyers under a law that took effect on January 22. The two cities held sacred by Muslims, Makkah and Madinah, stay off-limits to non-Muslims entirely.
The clarification aligns the fees with the Law of Real Estate Ownership by Non-Saudis, which REGA put into force on January 22, 2026. REGA’s statement lines up the specific surcharges, but the actual map of approved zones that the law depends on was due in the first quarter of 2026. For a foreign buyer sitting down with a broker, the bill has two clearly stated components: the 5% transaction tax on every transfer, and the 2% surcharge on non-Saudis in four named cities.
The Two-Layer Tax on Property Transfers
The headline figure is the 5% Real Estate Transaction Tax (RETT), imposed on all property transactions under the Real Estate Transaction Tax Law. That tax was issued by Royal Decree and took effect on April 10, 2025, replacing an earlier regime under Royal Order from 2020 and applying to sales, bequests, mortgage-related transfers and similar dispositions. Both Saudi and non-Saudi buyers pay it, as set out on ZATCA’s 5% transaction tax regulation.
The new layer is the additional 2% fee, which REGA applied to non-Saudi transactions inside the four named cities. Spokesperson Taisir Al-Mufarrij said the surcharge operates “in accordance with the relevant law and its executive regulations, in addition to the 5% real estate transaction tax,” in the July 8 clarification on the 2% non-Saudi fee reported by Saudi Gazette. The executive regulations set the actual fee at 2%, even though the underlying Foreign Ownership of Real Estate Law allows REGA to set a transfer fee of up to 5%. In other words, the 2% is the published rate today, while 5% remains the statutory ceiling that REGA could in principle raise to. For investors tracking the gap between the two numbers, that ceiling matters: a future regulatory revision could lift the surcharge without a new law.
The two levies stack inside the same transaction, collected through electronic payment systems that REGA requires before any title deed can transfer. REGA’s published overview of the regime notes that combined fees for foreign buyers could in principle reach 10%, the 5% RETT plus a disposition fee of up to 5%. That is the ceiling, not the current rate. The July 8 clarification settles which end of the range applies to the four cities today: 5% RETT, plus 2% for non-Saudis.
Where Non-Saudis Can Actually Buy
REGA’s geographic zones are the second load-bearing wall of the regime. The new law replaced a 25-year-old statute and adopted a “designated-zone model” rather than opening the entire Kingdom to foreign freehold. A foreign buyer may qualify to purchase in one project, district or development zone, and be barred from a neighbouring street outside it.
The approved zones in Riyadh and Jeddah cover the urban centres REGA has earmarked as the Kingdom’s “two principal economic and urban centres.” Legal advisers tracking the rollout have identified a long list of designated areas, including the King Abdullah Financial District, New Murabba, King Salman Park, King Salman International Airport, Sports Boulevard and transit-oriented development sites in Riyadh, plus Jeddah Central. Outside those urban cores, the zones extend to the Kingdom’s flagship giga-projects and tourism destinations: NEOM, The Red Sea Project, AMAALA, AlUla, Diriyah Gate, Qiddiya. Special economic zones and strategic industrial areas, including Jazan, Ras Al-Khair and King Abdullah Economic City, are also part of the wider map.
Here is how the city-by-city landscape breaks down for a foreign buyer weighing the surcharge against the address.
| City / Zone | 5% RETT | 2% Non-Saudi Surcharge | Ownership Eligibility |
|---|---|---|---|
| Riyadh (designated zones) | Yes | Yes | Non-Saudis in mapped areas |
| Jeddah (designated zones) | Yes | Yes | Non-Saudis in mapped areas |
| Makkah (designated zones) | Yes | Yes | Muslim individuals and Saudi companies |
| Madinah (designated zones) | Yes | Yes | Muslim individuals and Saudi companies |
| Other approved zones (NEOM, Red Sea, AMAALA, AlUla, Diriyah, Qiddiya, KAFD, New Murabba, KAEC, etc.) | Yes | Not stated in the July 8 clarification | Non-Saudis in mapped areas |
REGA’s statement limits the 2% fee to transactions inside the four named cities, with no mention of surcharges in other approved zones such as NEOM or AlUla. That distinction matters for an investor choosing between, say, a Riyadh apartment in the Financial District and a coastal villa in Amaala. Property categories also vary by zone: residential, commercial, hospitality, tourism, industrial and investment-linked real estate all sit inside the rules, but the specific rights available, including full ownership, usufruct, long-term lease and easement, depend on the zone. The full Geographic Zones Document, which will map these rights and the permitted ownership percentages, was due in the first quarter of 2026.
Outside the approved zones, only one narrow route remains: a legally resident non-Saudi may buy a single residential property for personal use, in any city other than Makkah or Madinah. Diplomatic missions and international organisations accredited in Saudi Arabia can also own premises for official use, subject to reciprocity. Saudi companies with foreign shareholders can hold property outside the foreign-ownership zones, excluding Makkah and Madinah, after approval from the Ministry of Investment, provided the property is for business operations or staff housing.
Why Makkah and Madinah Stay Closed to Non-Muslims
Of the four cities covered by the surcharge, Makkah and Madinah carry the heaviest additional restriction. REGA said both are subject to “special provisions that preserve their religious and historical significance.” Property ownership in the two holy cities is limited to Muslims, within designated areas and in accordance with approved legal procedures. The rule predates the 2026 ownership law: the prohibition on non-Muslim foreign ownership in Makkah and Madinah traces back to the 2000 statute that the new law replaced, and was carried over in the 2025 text, which permits only Muslim individuals and Saudi companies with foreign shareholders to acquire limited rights in the two cities. The narrower pool of eligible buyers is the practical effect of the religious carve-out.
The narrower pool changes the market mechanics for Makkah and Madinah, even if the 2% fee headline looks the same. Demand is concentrated among Muslim residents of Saudi Arabia, Muslim expatriates already living in the Kingdom, and Muslim investors based abroad. Hospitality and religious-tourism-linked real estate are the most plausible categories to attract capital under the carve-out. Non-Muslim investors, the largest single investor pool globally for premium Gulf real estate, are simply not in the market for these two cities.
REGA’s framing leans on heritage, but the operational result is geographic: two of the four surcharge cities have a much smaller eligible buyer base than Riyadh or Jeddah. The law still treats all four as part of one regime, with the same 5% RETT and the same 2% surcharge applying to those who can transact. It is the eligibility filter, not the tax rate, that determines who actually pays.
Thirteen Agencies Sit on the Supervisory Committee
Compliance with the regime is not a one-agency job. When REGA activated the law on January 22, the Council of Ministers simultaneously stood up a Supervisory Committee for Non-Saudis Owning Real Estate, made up of 13 government entities. The roster is broader than the typical tax-administration chain: alongside REGA, the Ministry of Investment, the Ministry of Justice and the Zakat, Tax and Customs Authority, it includes the Ministry of Interior, the Ministry of Municipal and Rural Affairs and Housing, the Ministry of Environment, Water and Agriculture, the Ministry of Industry and Mineral Resources, the Royal Commission for Makkah City and Holy Sites, the Madinah Region Development Authority, the Economic Cities and Special Zones Authority, the General Authority for Statistics and the Saudi Central Bank. The committee’s mandate, set out on REGA’s framework for non-Saudi property ownership, is to monitor implementation, recommend policy changes, review performance reports and manage risk. For a foreign buyer, that means the same transaction can touch regulators who normally work in separate silos: investment licensing, religious-site planning, banking supervision and urban zoning all sit at the same table.
The cross-agency design is partly a response to the regime’s main risk: that foreign ownership in sensitive locations could outpace the rules meant to govern it. Two of the 13 agencies, the Royal Commission for Makkah City and Holy Sites and the Madinah Region Development Authority, exist almost entirely to manage that risk in the two cities where non-Muslims are excluded. Foreign-company buyers face an additional layer: registration with the Ministry of Investment through Invest Saudi is mandatory before any property acquisition, and companies must notify the ministry within 15 days of any change in ownership of 5% or more, or any governance change that affects control. The committee structure, in other words, is the operational form of the zoning regime REGA has built on top of the tax.
Ten Exemptions and a SR10 Million Penalty
REGA’s regulations identify ten categories of transactions exempt from the 2% surcharge, even when a non-Saudi is involved. They are the soft edges around an otherwise strict regime.
- Inheritance divisions.
- Final court judgments.
- Expropriation for public use.
- Donations to endowments and government entities.
- Returning property to its previous owner within 180 days under specified conditions.
- Division of jointly owned property without increasing ownership shares.
- Transactions involving diplomatic missions and international organisations under reciprocity arrangements.
- Transfers of property to wholly owned companies or investment funds.
- Sales of real estate units developed on foreign-owned land, subject to project completion and sale deadlines.
The exemption list tells its own story about who REGA expects to use the regime most. Inheritance divisions and final court judgments cover the involuntary transfers that happen regardless of the new law. Donations to endowments and government entities, plus transfers to wholly owned companies and investment funds, suggest REGA is keeping institutional vehicles open. The diplomatic-mission exemption, granted on reciprocity, points to a quieter channel for embassies and international organisations that does not consume the surcharge.
The same regulations establish a graduated penalty system for foreign buyers who break the rules. The most serious fine targets buyers who submit false or misleading information to obtain ownership: up to 5% of the value of the property right, capped at SR10 million (approximately USD 2.67 million) per offence, as set out in the 2025 foreign ownership law’s key provisions. Other violations, including obstructing REGA inspectors, failing to rectify breaches, or failing to report required ownership changes, carry fines ranging from warnings to penalties between 0.1% and 3% of the property’s value, with maximum fines reaching SR4 million in some cases and up to SR2 million for repeated reporting violations. Where a foreigner has obtained property using false information or in prohibited circumstances, REGA can order a public auction of the property. Decisions of the supervisory committee can be appealed to the administrative courts within 60 days.
The penalty structure layers fines on top of fines: false-information violations trigger the SR10 million ceiling, secondary breaches draw SR4 million penalties, and the SR2 million ceiling applies to repeated reporting failures. The supervisory committee’s decisions can be appealed to the administrative courts within 60 days. The structure is built around deterrence rather than revenue generation.
The regulations governing non-Saudi property ownership in the four cities are designed to reflect the unique characteristics and development objectives of each location.
REGA spokesperson Taisir Al-Mufarrij framed the rules in that language in the July 8, 2026 clarification. The wider regime, in REGA’s view, is a quality-and-development mechanism rather than a revenue lever.
What the Clarification Has Not Yet Settled
The clarification tidied the fee question; it did not settle several others. The Geographic Zones Document, which will set the boundaries within which the 2% surcharge actually applies, was due in the first quarter of 2026. REGA’s January 22 announcement said the document would be issued during that quarter, but no later update on its publication has appeared in the same official channels. Until the zones are mapped and published, a foreign buyer can confirm the 5% RETT and the 2% surcharge but cannot pre-confirm the property’s eligibility based on location alone.
The ownership-right question is similarly unresolved at the headline level. The 2026 law allows a buyer to acquire full ownership, usufruct, easements or long-term leaseholds, depending on the zone and the asset type. Council of Ministers resolutions will set maximum ownership shares and any time limits on those rights, and those resolutions have not been published alongside the July 8 statement. Saudi companies with foreign shareholders were given a separate, looser rule: they can own property outside the foreign-ownership zones, excluding Makkah and Madinah, after Ministry of Investment approval, with no published ceiling on that pathway. The wider regime is therefore a framework waiting for its detailed map.
REGA’s own statement signals more updates are coming. The authority said it would publish a detailed procedural guide explaining how the regulations will be implemented. For investors and brokers, the practical advice is to verify eligibility directly through REGA’s Saudi Properties portal before any commitment, since the zones and detailed rules may be revised. The 2% figure is the clearest piece of the puzzle REGA has offered so far; the map it sits inside is still being drawn.
Frequently Asked Questions
What is the 5% real estate transaction tax in Saudi Arabia?
The 5% Real Estate Transaction Tax (RETT) is a levy on property transactions imposed by the Real Estate Transaction Tax Law, which took effect on April 10, 2025, replacing an earlier regime under Royal Order from 2020. It applies to all property transfers, including sales, bequests, mortgage-related transfers and similar dispositions, by both Saudi and non-Saudi buyers.
Why is there an additional 2% fee for non-Saudi buyers?
The 2% fee is the surcharge REGA has set under the Foreign Ownership of Real Estate Law for property transactions involving non-Saudis inside designated geographic zones in Riyadh, Jeddah, Makkah and Madinah. The underlying statute allows REGA to set a transfer fee of up to 5% on disposals by non-Saudis; the July 8, 2026 clarification placed that fee at 2% in the four cities.
Can foreigners buy property anywhere in Saudi Arabia?
No. The 2026 regime is a zoned ownership model rather than a fully open freehold market. A foreign buyer may qualify to purchase in one project, district or development zone and be barred from a neighbouring street outside it. One narrow exception exists: a legally resident non-Saudi may own a single residential property outside the designated zones for personal residence, excluding Makkah and Madinah.
Can non-Muslims buy property in Makkah or Madinah?
No. REGA’s regulations restrict property ownership in the two holy cities to Muslims, within designated areas and in accordance with approved legal procedures. The restriction predates the 2026 ownership law and was carried over from the 2000 statute the new law replaced.
How do non-Saudis apply to buy property in Saudi Arabia?
REGA’s Saudi Properties portal is the official channel. Residents of the Kingdom can apply directly using their residency ID, with automated eligibility checks and electronic procedure completion. Non-residents must first obtain a digital identity through Saudi embassies abroad. Foreign companies without a presence in the Kingdom must register with the Ministry of Investment through Invest Saudi and obtain a Unified Number before completing ownership procedures.
What are the penalties for violating Saudi property ownership rules?
Buyers who submit false or misleading information to obtain ownership face fines of up to 5% of the property’s value, capped at SR10 million per offence. Where property is obtained using false information, REGA can order a forced public auction. Other violations carry fines ranging from warnings to penalties between 0.1% and 3% of the property’s value, with maximum fines reaching SR4 million in some cases and up to SR2 million for repeated reporting violations.
Disclaimer: This article is for informational purposes only. Real estate transactions in Saudi Arabia involve tax, legal and regulatory considerations that vary by city, property type and buyer profile. Consult a qualified Saudi legal or tax professional before any commitment, and verify current fees and zone eligibility directly through REGA’s Saudi Properties portal. Figures cited are accurate as of the July 8, 2026 REGA clarification.
