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Tuesday, 15 December 2015

Apartment Rents are expected to lower down as Saudi government introduced 2.5% tax

On Monday, the Council of Ministers approved a law for imposing tax on the undeveloped plots in urban areas from the month of Ramadan. The decision was taken by the authorities due to growing shortage of houses. The higher prices of the residential houses have made it difficult to find a suitable shelter for them in affordable prices. In Riyadh, the custodian of the Two Holy Mosques, King Salman, chairs the Cabinet's session at Al-Yamama Palace. The king reinforced the idea of imposing 2.5 percent tax on the unused land and the unoccupied land.



The decision was taken in the weekly session of the cabinet. King Salman instructs the concerned authorities to start working on the plan. The tax will be implemented since the month of Ramadan. The law endorsed that 2.5 percent of the value of land has to be levied as tax per annum. The cabinet has also formed a separate committee that would keep a check and balance of the tax payers. Those found violating the law will be fined accordingly. The Saudi Press Agency reported that income which would be collected in the form of taxes will be used for housing projects as well as for implementing infrastructure facilities and services at these projects.



Saudi Arabian Monetary Agency (SAMA) said that the revenues generated as a tax will be put away separately in an account. The money obtained from the tax payers will be extracted from the value of the land after assessment and appraisal by the committee. In the previous week a draft tax on undeveloped land was endorsed by the Shoura Council. Minister of Culture and Information Adel Al-Turaifi while talking to SPA told that the administrative by law of the land tax regulation details the criteria to calculate the usefulness of a property, the time-bound program to levy tax in a phased manner, and the required official procedures to ensure fair implementation of the tax system in a suitable manner without tax evasion.



The Ministry of housing has collaborated to construct an effective action plan on the collection of taxes. The new law is essential as much of the urban land is owned by wealthy individual or companies which prefer holding it. Due to the tax implementation, the rent of the houses will decrease and it will bring the houses buying prices down. In this regard the Cabinet had instructed the Council of Economic and Development Affairs (CEDA), chaired by Deputy Crown Prince Muhammad Bin Salman, second deputy premier and minister of defense, to prepare the required regulations and proceedings. While the main rationale about preparing the tax proposal supervised under (CEDA) Council of Economic and Development Affairs aims to bring down the prices of land for building housing units for the low and limited income people.



There are greater chances that many Saudis will be able to get hands on houses in affordable prices. Moreover, with the increase of the domestic buildings in Saudi Arabia, the shortage of flats will also be overcomed. You can expect rents to lower down in next couple of years due to this decision. 2.5% tax of the fair market value of the land is a huge amount and people would try to construct them and earn some rents rather paying 2.5% tax on barren land.


Source: Saudi Gazette

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