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May 15, 2026

This ZATCA circular clarifies the VAT treatment for Real Estate Loan Portfolio Insurance procured by financial institutions in Saudi Arabia. It confirms that the supply of such insurance is subject to the standard 15% VAT rate. The guide outlines the conditions under which financial institutions are considered the customer and can deduct input tax, emphasising the need to attribute the expense to taxable supplies. It provides criteria for apportionment for mixed-use costs. The circular also clarifies that no onward or nominal supply occurs to the borrower, meaning no output tax obligation arises for the institution, provided no separate charge is levied.

Tax Treatment Real Estate Loan Portfolios Insurance

Zakat, Tax and Customs Authority

October 2022

1. Definitions

2. Circular Subject

3. Overview

4. VAT treatment of the supply of real estate loan portfolios insurance

5. Deduction of input tax incurred by the financial institutions

6. The extent to which financial institutions make an onward supply or nominal supply of insurance to the borrowers

The Zakat, Tax and Customs Authority ("ZATCA", "Authority") has issued this Tax Circular for the purpose of clarifying certain tax treatments concerning the implementation of the statutory provisions in force as of the Circular’s issue date. The content of this Circular shall not be considered as an amendment to any of the provisions of the Laws and Regulations applicable in the Kingdom.

Furthermore, the Authority would like to highlight that the clarifications and indicative tax treatments prescribed in this Circular, where applicable, shall be implemented by the Authority in light of the relevant statutory texts. Where any clarification, interpretation or content provided in this Circular is modified - in relation to unchanged statutory text - the updated indicative tax treatment shall then be applicable prospectively, in respect of transactions made after the publication date of the updated version of the Circular on the Authority's website.

Definitions

Terms and phrases contained in this Circular shall have the meanings ascribed to each of them unless the context requires otherwise:

Contents

Definitions