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Saudi Arabia approves amendment to Executive Regulations for Zakat Collection on real estate and off-plan projects
- Saudi Arabia issued Ministerial Resolution No. 1248 on 13 June 2025, announcing an approved amendment to Article 73 of the Executive Regulations for the Collection of Zakat (Bylaws) on real estate projects under construction and off-plan sales projects, issued earlier as a draft for public consultation.
- The amendment clarifies zakat obligations for developers, encouraging better compliance and reducing ambiguity in the assessment process.
- Taxpayers involved in real estate should review the amendment to align their zakat calculations and reporting practices accordingly.
Executive summary
Published in the Official Gazette on 13 June 2025, Ministerial Resolution (MR) No. 1248, dated 10/11/1446 AH , approves the amendment of Article 73 of the Executive Regulations for the Collection of Zakat (Bylaws), relating to real estate projects under construction and off-plan sales projects.
This amendment clarifies the zakat obligations for off-plan sales real estate projects.
Detailed discussion
Background
On 15 January 2024, Saudi Arabia's Zakat, Tax and Customs Authority (ZATCA) announced proposed amendments to Article 73 of the Bylaws relating to real estate projects under construction.
The ZATCA had proposed to add a new paragraph to Article 73, addressing the zakat treatment of off-plan real estate projects for sale. (See EY Global Tax Alert, Saudi Arabia proposes amendments to Zakat Executive Regulations for real estate projects under construction , dated 16 January 2025).
Highlights of the approved amendment
The approved amendment to Article 73 introduces clearer guidelines on the zakat treatment of off-plan real estate sale projects, as follows.
Deduction method for off-plan sales projects: Off-plan sales projects licensed by the relevant authority can be deducted from the zakat base using the formula below, allowing for a more accurate calculation of zakat obligations when the result is greater than zero.
Deductible amount = Project balance at year-end - value of additions during the year.
Project-specific application: The calculation must be done for each project individually. If a project's balance includes both current and noncurrent assets, deductions will first be taken from the noncurrent assets.
Implementation: The amendment applies to fiscal years starting on 1 January 2025 and beyond, with provisions for taxpayers to request its application to prior fiscal years.
Implications
Real estate businesses should review the amendment and assess their zakat obligations relating to off-plan sales projects.
For additional information concerning this Alert, please contact:
Ernst & Young Professional Services (Professional LLC), Riyadh
- Asim Sheikh, Saudi Arabia Tax Market Segment Leader
- Ahmed H. Akeel, Business Tax Services
- Nitesh K. Jain, Global Compliance and Reporting
- Atif Khan, Global Compliance and Reporting
- Ahmed Mubarak, Business Tax Services
- Esraa Albuti, Business Tax Services
- Hosam Abdulkareem, Business Tax Services
- Imran Iqbal, Global Compliance and Reporting
- Mirza Ashraf, Global Compliance and Reporting
- Babar Ali, Business Tax Services
- Wissam Merhej, Business Tax Services
- Carl Suchtelen, Global Compliance and Reporting
- Rula Dajani, Business Tax Services
- Suleiman Mohammed, Global Compliance and Reporting
- Billy Thorne, International Tax and Transaction Services
- Carsten Kuhlmann, International Tax and Transaction Services
- Ricardo M. Cruz, Saudi Arabia International Tax and Transaction Services and Transfer Pricing Leader
Ernst & Young Professional Services (Professional LLC), Jeddah
- Ayman Abu El lzz, Global Compliance and Reporting
- Hussain Asiri, Business Tax Services
- Amro El Fadly, Business Tax Advisory
- Dana D. Dandashi, Global Compliance and Reporting
- Asem Habis, Business Tax Services
Ernst & Young Professional Services (Professional LLC), Al Khobar
- Syed Farhan Zubair, Global Compliance and Reporting
- Ali K. Khamis, Business Tax Services
- Patrick Oparah, International Tax and Transaction Services
- Miranda Baas, International Tax and Transaction Services
- Bilal Mian, Global Compliance and Reporting
- Javed Aziz, Global Compliance and Reporting
- Haytham Hassan, Global Compliance and Reporting
- Waqas Khan, Business Tax Services
Ernst & Young LLP (United States), Middle East Tax Desk, New York
- Yuriy Melnyk
For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.
Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor