Saudi Arabia Advances Tokenized Real Estate Taxation Rules

As Saudi Arabia advances its Vision 2030 digital agenda, tokenized real estate is emerging as a structure that represents property ownership rights through digital tokens recorded and transferred on blockchain platforms.

The Real Estate Registry, supervised by the Real Estate General Authority, has launched a national infrastructure to support property tokenization and digital ownership transfer, including blockchain-based registration, fractionalization, and marketplace connectivity, with the aim of improving transparency, liquidity, and investor access.

In practical terms, tokenization converts rights in a property into tokens that may represent full or fractional interests, along with associated entitlements to rental income and capital gains. These tokens can be bought and sold on platforms with low entry points, supporting broader participation in real estate investment.

As these models scale, stakeholders will need to address the tax consequences, particularly under Zakat, Value-added Tax, and Real Estate Transaction Tax—for investors, developers, and the platforms involved. Zakat is a Shari’ah-based, religiously mandated levy, typically assessed at 2.5% annually and is applicable to Saudi and GCC owned businesses.

Investors

Non-Saudi. Non-Saudi investors participating in tokenized real estate tied to Saudi assets could face exposure to Saudi corporate income tax or withholding tax under the Kingdom’s corporate tax framework. Because current rules do not expressly address blockchain-based or tokenized ownership structures, a key uncertainty is whether the relevant taxable event sits at the level of the token transfer itself or at the level of the underlying real estate interest being represented.

Saudi. For Saudi investors, the Zakat analysis typically turns on the purpose for which the tokens are held. Where tokens are acquired and held primarily for trading or resale, they are more likely to be treated astrading assets subject to Zakat and valued at fair market value at the end of the Zakat year.
In cases where tokens are held to generate income or for long-term appreciation, the position is closer to a fixed-asset holding, with Zakat exposure generally focusing on the income stream produced—such as rental income—rather than the underlying asset value, subject to the investor’s overall Zakat profile and applicable rules.

VAT Treatment

VAT outcomes for tokenized real estate structures may vary depending on the nature of the token.

Utility tokens. Where the token represents a right to participate in rental income or other cash-flow streams, the arrangement may be analyzed as a financial instrument and could potentially fall within VAT-exempt financial services treatment, depending on how the rights are structured and documented.

Distributions. Income distributed to investors could be viewed either as rental income or as a return on investment, depending on the classification of the tokens. Rental income could be either exempt or taxable at 15%, depending on whether the property is residential or commercial. If the distributions are considered as return on investments, such as dividends, they may fall outside the scope of VAT.

Platform fees. Fees charged by a platform for services such as property listing and property management are typically subject to VAT. However, fees related to the management or transfer of financial instruments may qualify for financial services treatment, potentially altering the VAT treatment.

Asset-backed tokens. If the token is designed to represent a direct interest in the underlying property, the VAT analysis is more likely to track the treatment of the real estate transaction itself, where the purchase and sale of real estate is generally treated as VAT-exempt, subject to the applicable characterisation rules.

RETT Treatment

If the token represents a direct interest in the underlying property, or asset-backed token, real estate transaction tax, or RETT, at 5% could be applicable on the sale and purchase of such tokens. RETT legislation in the Kingdom provides an exemption to the trading of listed securities. Whether the tokens qualify as securities financial instruments, as mentioned above, and if trading on a platform can be treated as securities being listed, would be an interesting question. The key issue is the classification of the tokens—whether they would qualify as securities or financial instruments. Further if the tokens can indeed be classified as securities, whether platform-based trading can be characterized as trading in listed securities under the Kingdom’s RETT exemption.

Individual Taxation

Documentation. Adequate documentation, valuation reports, and transaction evidence from the blockchain platform should be maintained to substantiate Zakat computations and ensure compliance with Ministerial Resolution 1007. This resolution is the Saudi Ministry of Finance’s decision that formally issued an updated framework setting out how Zakat is calculated, documented, and collected. In simple terms, it sets out clearer, more detailed instructions, across 128 articles, so businesses know exactly what to do, how to comply, and how to handle common problem areas, with the goal of making the process easier and improving voluntary compliance.

Classifying investment. For stakeholders assessing VAT exposure in tokenized real estate, the first step is to classify the investment correctly—specifically, whether it is best characterized as a financial instrument or as a direct or indirect interest in real estate—because that classification will drive both the VAT position and the potential RETT treatment.

Analyze economic flows. Stakeholders should analyze the VAT treatment of the relevant economic flows, including rental income, capital gains, and sale proceeds, and evaluate whether VAT incurred on associated costs and platform fees is recoverable under the applicable rules.

ZATCA clarification request. Given the current areas of uncertainty, it may also be prudent to seek certainty through a private clarification request to the Zakat, Tax and Customs Authority, ZATCA. In parallel, platforms and investors should maintain comprehensive records covering token issuance, ownership history, and transaction flows to support the adopted tax position under audit.

Non-Saudi investor corporate tax. For corporate tax purposes, non-Saudi investors participating in tokenized Saudi real estate may be exposed to Saudi corporate income tax or withholding tax on Saudi-sourced income.

Where the investment is routed through a Saudi-based platform and income is generated through rental yields or capital gains connected to Saudi real estate, the structure may also raise questions around the creation of a taxable presence in the Kingdom—such as permanent establishment risk—as well as the appropriate application of withholding tax or corporate income tax, depending on how ZATCA interprets the legal form and economic substance of the arrangement.

Token transfers. A further complication is that the tax treatment of token transfers, as distinct from transfers of the underlying property interest, remains unsettled, which can create compliance uncertainty. In practical terms, investors should maintain clear ownership and transaction documentation, assess treaty relief where available, and monitor evolving ZATCA guidance on the taxation of digital and tokenized asset structures.

Zakat. Zakat treatment in tokenized real estate arrangements will typically depend on the profile of the token holder—corporate entity or individual—and, for corporate investors, how the tokens are classified in the financial statements.

For corporate entities, tokens representing an economic interest in real estate are generally analyzed as either investment property, where they are held for long-term rental income or capital appreciation, or as inventory, where they are acquired for trading. That distinction matters because tokens treated as long-term investment property are generally deducted from the Zakat base, while tokens held for short-term trading are typically included in the Zakat base at their market value as of the Zakat due date.

As a compliance matter, Zakat registration and payment obligations rest with the token holders—meaning the corporate entities that legally own the tokens and therefore hold the economic interest represented by those tokens.

For individual investors, Zakat filing with ZATCA is generally not required unless the individual is registered as a commercial entity.

What’s Next?

Today, tokenized real estate offers opportunities in Saudi Arabia’s evolving real estate landscape, but it also requires adherence to ZATCA’s VAT, RETT, Zakat and corporate tax regulations. As ZATCA continues to refine its regulatory framework in tandem with global laws, stakeholders must stay informed and proactive to ensure compliance and optimize tax and Zakat efficiency.

Clear guidance and proactive engagement with ZATCA will be essential to ensure compliance and unlock the full potential of tokenized real estate in Saudi Arabia.

Author Information

Nimish Goel is a partner and head of GCC at Dhruva, where he advises multinational companies on indirect tax, corporate tax, and digital compliance strategies across the Gulf region.

Manish Bansal, based in the firm’s Riyadh office, is an associate partner at Dhruva and advises multinationals on VAT and related transaction structuring, implementation, and tax-efficient operating models.