Saudi Arabia Eyes Land Tax

November 23, 2015 Taxation in Saudi Arabia

Saudi Arabia may turn to taxes to encourage land developers to utilize their land for residential development by implementing a 2.5 percent tax on undeveloped land.

Last week the Shura Council, a body which provides advice on legislation to the government of Saudi Arabia, approved the proposal to implement a tax on undeveloped land in the Riyadh.

It is estimated that approximately 49 percent of all land in Riyadh is currently unused, and, similarly, 50 percent of land and Dammam and 40 percent in Jeddah is also undeveloped.

The council recommended that the owners of the land be taxed at a rate of 2.5 percent of the value of the land if it remains undeveloped.

In Saudi Arabia it is common for wealthy developers to purchase land but not engage in any actual development, instead opting to wait for the land to appreciate in value, and then selling the land for a profit.

The Council believes that the new tax could deter such hoarding behaviour, as it will no longer be economically viable to hold the lands.

It is estimated that the tax could raise as much as SAR 50 billion per year.

Further, according to the Council, if the tax leads to a sale of even 10 percent of all land currently hoarded in major cities, then it could be considered a success.

Photo By: Andrew A. Shenouda