Individuals can now reclaim VAT wrongly paid on property sales

The Zakat, Tax and Customs Authority (ZATCA) has set out how individuals can recover value added tax they paid on property sales when it was not due, and how unpaid amounts will be cancelled. The decision took effect on Tuesday 13 October, when it was published in the Official Gazette, Okaz reported.

VAT is not due on an individual's property sales if, before the real estate transactions tax started on 4 October 2020, they were not selling property regularly as a source of income. The exception is someone who made more than one sale within 12 months worth more than the VAT registration threshold in total. People who paid this tax or its penalties, whether through a voluntary disclosure, a ZATCA decision or a court ruling, can claim it back, as long as they did not deduct input VAT on that property and have not already recovered the money from another government body.

Tax and penalties of this kind that have not been paid are cancelled through an amended return or a ZATCA assessment. Individuals are also exempt from unpaid penalties on property sales made between 1 January 2018 and 4 October 2020 once they pay the original tax, except penalties for tax evasion. Anyone who deducted input VAT on their property sales cannot recover or cancel the tax, but may still qualify for the penalty exemption.

If this applies to you, the clock is already running: refund claims go directly to the committees that settle tax, zakat and customs disputes, within 30 days of 13 October. ZATCA says it will check each claim and collect the tax from anyone found not to qualify. The authority has not yet published a separate online form for these claims, so check its website and keep your sale contract and payment receipts ready.