The new White Land Tax Law raises the yearly taxes on white lands within urban boundaries up to 10% of the land's value and introduces a tax on vacant real estate within urban boundaries up to 5% of its value. The new law will widen the scope of "white lands" to include all lands within urban boundaries and not just commercial and residential lands as with the case in the old law. Regulations will accompany changes to the law and will provide more detail on the applicability and implementation of the tax. Once in force, owners of white lands and vacant real estate will be required to pay yearly taxes on undeveloped lands and vacant real estate within urban boundaries. The exact tax will be determined upon the issuance of the regulations.
On 29 April 2025, the Council of Ministers approved certain amendments to the White Land Tax Law (the "Amendments"), raising existing taxes on unused lands and adding more lands and unused real estate under the scope of the law.
What is "White Land" and the White Land Tax Law?
The White Land Tax Law which was approved on 24 November 2015 (the "Old Law") imposed a tax at a flat rate of 2.5% on the value of residential or commercial unused lands located within urban boundaries. The new Amendments allow for a tax rate of up to 10% of the value of land.
Under the Old Law, "white land" was defined as unused residential or commercial lands within urban boundaries. The new Amendments expand the definition of white land to include "any unused land capable of being developed and within urban boundaries."
What is the impact of the new Amendments?
In addition to widening the definition of "white land", the Amendments capture vacant real estate within urban boundaries which will also be taxable up to 5% of the value of the real estate. This percentage can be increased to 10% based on the suggestion of a ministerial committee.
The specific regulations relating to taxing vacant real estate will be issued within a year from publication of the Amendments. The regulations will address matters such as the timeframe after which real estate would be considered "vacant".
These changes reflect a wider push by the Saudi government to curb rising real-estate prices and are part of a wider plan to stimulate development and create a more balanced real estate market in the Kingdom of Saudi Arabia.
What to expect next?
There are two additional regulations which are expected to accompany the Amendments: (i) regulations that govern white lands, which must be issued within 90 days from the publication of the Amendments; and (ii) regulations that govern vacant real estate, which must be issued within a year from the publication of the Amendments. Due to a shorter grace period, it is expected that the Amendments relating to white land may take effect faster than those that concern vacant real estate due to the former's regulations likely being issued first.
In all cases, both regulations are expected to address several matters of importance such as (i) the mechanism and conditions for implementing the relevant tax (ii) the standards that, if met, the tax ceases to be applicable; (iii) evasion prevention provisions; and (iv) notification provisions for the owner of the land/real estate in relation to any decisions taken against them. Following the issuance of these regulations, we anticipate that there will be a more comprehensive tax system linked to the value of the land or real estate as opposed to the former flat tax in place on "white lands" in the Kingdom.
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