What you need to know about idle land executive regulations

Saudi Arabia’s Cabinet approved in April amendments to the Idle Land Fees Law.

Today, Umm Al-Qura gazette published the details of the relevant executive regulations, which consist of 15 articles. The regulations set the fee on undeveloped land at up to 10% of its value, in line with urban development priorities.

Pursuant to the articles, a city becomes subject to the fee when any of the following criteria are met: a gap between supply and demand for developed land, rising real estate prices, a shortage of developed land, hoarding of undeveloped land without development, the proportion of white lands within the urban boundary, and urban development priorities.

The regulations also stipulate that new owners of undeveloped land, who acquire ownership after the grace period mentioned in paragraph (d/2) of this article, must submit the required documents and data related to such land to the Ministry within 30 days from the date of ownership transfer.

The annual fee due on undeveloped land (or a group of such lands) located within designated geographic zones is determined according to the urban development priorities of each city as follows:

-The first tier (highest priority): An annual fee of 10% of the land’s value.

-The second tier (high priority): An annual fee of 7.5%.

-The third tier (medium priority): An annual fee of 5%.

-The fourth tier (low priority): An annual fee of 2.5%.

-The fifth tier (outside development priorities) is exempt from annual fees, though the land is still counted as part of the owner’s total undeveloped holdings within the city.

The Ministry will conduct an annual review of the availability of housing units and land, supply levels, transaction volumes, prices, and monopolistic practices in any city or geographic area, to determine whether the fees should apply, whether the area subject to fees should be adjusted, or whether application should be suspended—based on the criteria outlined in paragraph (1) of this article and urban development priorities.

Fees are imposed on undeveloped land; which is suitable for development or construction. The land must be within the scope of application as announced. Its area, or the total area of undeveloped lands owned by the same person within the city, must not be less than 5,000 square meters; and its designated use must be among those specified in the decision.

Under the regulations, a taxpayer is required to pay the fee as well as any penalties incurred for violating the law or regulations. The fee must be settled within one calendar year from the date of issuance of the invoice. If the invoice is issued retroactively for previous years, the fee becomes effective from the date of issuance, and payment must be made within 90 days of notification.

If the taxpayer is granted additional time to develop or build on the land in accordance with paragraph (3) of Article 8 of the regulations, then the payment deadline is extended until the end of that period. Should the taxpayer complete development or construction during the legal payment period or the granted extension—after having already paid the fee—the amount paid for that period is refunded.

If the taxpayer wants to sell the undeveloped land before development is completed, the payment period expires, and the taxpayer must settle all outstanding fees on the land before transferring ownership.