Real Estate

Tax changes penalise Saudis who hoard vacant land

May 2, 2025, 6:01 PM

Saudi Arabia's push for real estate growth has intensified with stricter land tax regulations under the White Land Tax Law

Tax aimed at owners of vacant land
White Land Tax is now 10% of property value
To encourage development on land

Amendments to land taxes in Saudi Arabia will make it more expensive for property owners to hold on to undeveloped land for long periods of time, or to buy and sell land quickly, tax experts have said.

Changes to the White Land Tax Law in the kingdom, which were ratified on Tuesday, aim to encourage the development of vacant land plots, and the utilisation or sale of unoccupied properties.

Owners of undeveloped land will now be subject to an annual tax of 10 percent of the property’s value, a three-fold increase over before. The law will apply to land greater than 5,000 square metres, almost the equivalent size of one soccer field or bigger.

“The White Land Tax in Saudi Arabia is a way of the government having its strategic efforts to address the housing shortage, to stimulate economic diversification, and also aligning with the general Vision 2030,” said Tina Hsieh, a tax specialist and partner at law firm Baker McKenzie.

“It is intended to ensure that the large landowners are not land hoarding and encourage a focus in developing residential and commercial land to address the housing shortage.”

The world’s second largest oil producer is also trying to widen its tax base and reduce its reliance on oil, which still accounts for 60 percent of revenue.

The kingdom’s value added tax is the highest in the region, at 15 percent, compared with 5 percent in the UAE, Oman and Qatar. Kuwait has no VAT.

The amendments also include a tax on long-vacant properties that have been prepared for occupancy, charging 5 percent of the expected rental value unless the owner is able to justify the building’s vacancy.

Executive regulations pertaining to the amendments, which will go into still more granular detail, will be released within 90 days.

The changes come at a time of 8 percent annual growth in the Saudi real estate market, according to a report by property consultants JLL.

Construction activity in Saudi Arabia, which has a population 35 million, has surged, particularly in the urban centres of Riyadh and Jeddah, as well as Mecca and Medina, home to Islam’s two holiest sites.

Knight Frank, the real estate consultancy, forecast in 2022 that the kingdom could become the world’s largest construction market by 2028, driven by a growing population and higher demand for housing.