Cairo: Saudi Arabia will exempt real estate transactions from a 15 per cent VAT (value-added tax) and instead impose a new 5 per cent tax on property deals, according to a Royal Order issued Friday. The Saudi finance minister said on Twitter that the order also aimed to support Saudi citizens who want to buy homes.

The country is facing a deep recession, with the economy shrinking by 7 per cent in the second quarter and unemployment hitting a record high of 15.4 per cent. The government had in July tripled VAT to 15 per cent to boost non-oil revenues, but the move set off limited domestic demand.

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The Royal Order said the government would bear the cost of the new Real Estate Transaction Tax “for up to 1 million riyals” for Saudi citizens purchasing their first home. “The Royal Order aims to support citizens and ease their burden and enable them to own homes, and helps develop the kingdom’s economy by spurring the residential and commercial property sector,” Finance Minister Mohammed Al Jadaan tweeted.

The housing minister said the move would help achieve a target of boosting housing ownership by Saudis to 70 per cent by 2030 in a country with an overwhelmingly young population.