RIYADH – The Council of Ministers is expected to approve the draft executive bylaw of the landmark law to impose tax on undeveloped plots of land in urban areas within the coming four weeks, according to informed sources. The Ministry of Housing will announce the names of the cities where the law will be implemented in the first phase during the holy month of Ramadan, which most probably starts on July 8. The weekly session of the Cabinet, held on Nov. 23, endorsed the law, which stipulates that 2.5 percent of the value of land will be levied as tax annually. The Cabinet had instructed the Ministry of Housing to prepare the executive bylaw in coordination with the concerned agencies. Accordingly, the concerned authorities are giving final touches to the bylaw, Sabq online news reported on Monday. The bylaw specifies the criteria to estimate the value of a property, the time-bound program to levy tax in a phased manner, and the required regulations to ensure fair implementation of the tax system in a way preventing tax evasion. According to article 9 of the executive bylaw, taxes will be imposed on unused urban land on areas covering 500,000 square meters or more in the first phase. In the second and third phases, land covering the areas of 250,000 sq. m and more, and then the areas covering 100,000 sq. m will be taxed. Tax will be imposed on all undeveloped land with an area of 40,000 sq. m in the fourth phase while land with an area of 100,000 sq. m or more will be taxed in the fifth and final phase. Article 8 of the law stipulates that the ministry will choose cities, where there is a huge demand for housing units for imposing tax on the undeveloped land, so as to achieve a balance between demand and supply. It will announce the details of the plots of undeveloped land in each city. The ministry will also review the situation of such lands in the designated cities on a regular interval each year. According to article 8 of the bylaw, there will be four criteria to assess the value of undeveloped plots of land in each city. The first criterion is the location of the land and the value of the plots adjacent to it. The utility of the plot, building regulations concerning the plot and the availability or proximity of public utility services are the other criteria. Those who violate the law will be fined, and revenues from the tax and fines will be used for housing projects as well as for implementing infrastructure facilities and services at these projects. Revenues will be deposited in an account at Saudi Arabian Monetary Agency (SAMA). The money charged will be extracted from the value of the land after evaluation. Earlier, the Cabinet had instructed the Council of Economic and Development Affairs (CEDA), chaired by Deputy Crown Prince Muhammad Bin Salman, second deputy premier and minister of defense, to prepare the required regulations with regard to taxing undeveloped urban land. Accordingly, the tax proposal was prepared under the supervision of CEDA to bring down the cost of land for building housing units for the low and limited income people. Analysts estimate that 40 to 50 percent of the land inside major cities remains vacant, much of it owned by wealthy individuals or companies that have tended to hold or trade it for speculative profits rather than developing it for housing. Fines for failure to pay would reach up to the amount of tax owed, the ministry said recently, tweeting with the hashtag "build it to give it life". Revenues raised would be spent on public services like roads, water, electricity and sewage systems at ministry housing projects, it said. The government has announced a series of steps intended to boost home ownership in the past year, including a government-backed mortgage scheme and plans to provide housing to 100,000 low-income families.
