Real Estate Related Services and their place of supply under Article 23

Services connected with land and buildings are among the clearest of the Special Cases in the Common VAT Agreement. Article 19(2) of the Agreement provides that, as an exception to Article 15, the place of supply of Real Estate Related Services shall be where the real estate is located. Article 19(1) describes such services as those closely linked to real estate, including real estate experts and agent services, granting the right to possess or use real estate, and services related to construction work. Article 23 of the Implementing Regulations gives that rule its detailed content in the Kingdom.

What counts as Real Estate

Article 23(1) provides that, for the purposes of applying the Agreement and the Law, Real Estate includes:

• any specific area of land over which rights of ownership or possession or other rights in rem can be created;
• any building, structure or engineering work permanently attached to the land; and
• any fixture or equipment which makes up a permanent part of or is permanently attached to the building, structure or engineering work.

The definition turns on permanence and attachment. Equipment that forms a permanent part of a building is Real Estate for this purpose; movable equipment that is not permanently attached is not.

What counts as a Real Estate related service

Article 23(2) provides that Real Estate related services are those which affect or are related to a specific area of Real Estate. The list that follows is expressly non-exhaustive and includes:

• the grant, assignment or surrender of any interest in or right over Real Estate;
• the grant, assignment or surrender of a personal right to call for or be granted any interest in or right over Real Estate;
• the grant, assignment or surrender of a license to occupy land or any other contractual right exercisable over or in relation to Real Estate, including the provision, lease and rental of sleeping accommodation in a hotel or similar establishment;
• any works of construction, demolition, conversion, reconstruction, alteration, enlargement, repair or maintenance of Real Estate; and
• services such as those supplied by estate agents, auctioneers, architects, surveyors, engineers and others involved in matters relating to Real Estate.

The common thread is a link to a specific area of Real Estate. Professional services such as architecture or surveying fall within the rule when they relate to an identified property, rather than being general advice.

Real Estate outside the Kingdom

Article 23(3) provides that services relating to Real Estate situated outside the Kingdom are not considered to relate to Real Estate in the Kingdom for the purposes of applying the Agreement and the Law. A Saudi architect designing a building located outside the Kingdom is therefore not making a Real Estate related service in the Kingdom under this rule.

Priority over the general principles

Because Article 19 of the Agreement is a Special Case, Article 22 of the Regulations gives it precedence over the general principles in Articles 15 and 16 of the Agreement. The residence of the supplier, and the residence or registration of the customer, does not change the place of supply of a Real Estate related service. For a building in the Kingdom, the place of supply is the Kingdom.

This has a direct consequence for zero-rating. Article 34(1)(d) of the Agreement excludes from the export-of-services zero rate the cases in Articles 17 to 21 that place the supply in a Member State. A service in respect of Real Estate in the Kingdom supplied to a customer outside the GCC Territory should therefore not be zero-rated on the basis of the customer's residence alone.

Distinguishing the service from the property

Article 23 determines where a service is supplied. It does not determine whether a supply of the property itself is exempt. That question is governed by Article 30 of the Regulations, which deals with the supply of real estate through transfer of ownership and the lease or license of residential real estate. A business should therefore apply Article 23 to locate the supply, and then apply the rate provisions separately.

Instruments relied on: VAT Law, Article 13; Common VAT Agreement, Articles 15, 16, 19 and 34(1)(d); Implementing Regulations, ninth edition, 26/11/1444H corresponding to 15/6/2023G, unofficial English translation, Articles 22, 23 and 30 (none was amended by ZATCA Board Resolution No. (01-06-24) dated 17/05/1446H, published in the Official Gazette, Umm Al-Qura issue 5082, on 18 April 2025). The Arabic text prevails.

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