Who Bears What at Completion: A Worked Cost Allocation in SAR

Price is one number; completion involves several. A step-by-step allocation of tax, brokerage and running costs on an illustrative apartment sale.

Buyers budget the price and then discover that completion involves a tax, a brokerage fee, an inspection, an adviser, a valuation and an apportionment of service charges. Who bears each item is a matter of contract, and leaving it vague is how an agreed price turns into an argument on the day. This example works the allocation through on an illustrative apartment so that the arithmetic is visible rather than assumed.

The situation

An apartment in a Saudi city is agreed at SAR 1,400,000 between a private seller and a buyer paying in cash. The parties have not discussed anything beyond the price. Every figure below is an illustrative assumption used to show the method, not a quoted rate, and the amounts you face depend on your own transaction and on the charges in force when you transact.

Assumptions (illustrative)

• Agreed price: SAR 1,400,000.
• Real Estate Transaction Tax: the published headline rate of 5 per cent, to confirm with ZATCA.
• Assumed brokerage fee for this example: 2.5 per cent of the price plus VAT at the published headline rate of 15 per cent.
• Assumed buyer-side professional costs: adviser SAR 9,000 and technical inspection SAR 3,500.
• Annual service charge on the unit assumed at SAR 18,000, already paid by the seller for the full year.
• Completion assumed to fall exactly three quarters of the way through the service charge year.

Step 1: Size the transaction tax

5 per cent of SAR 1,400,000 equals SAR 70,000.

This is the largest single completion item after the price, and it is the one most often left unallocated. Whoever bears it, it has to be funded on the day, so a buyer who assumed the seller would pay has a SAR 70,000 hole in the cash plan. Confirm the rate and its application with ZATCA for your transaction rather than relying on the figure used here.

Step 2: Size the brokerage fee with VAT

2.5 per cent of SAR 1,400,000 equals SAR 35,000, plus 15 per cent of that amount, SAR 5,250, giving SAR 40,250.

The VAT line is routinely forgotten when parties talk about a percentage. On this illustration it adds over five thousand riyals, and the fee percentage itself is a matter of agreement with the brokerage rather than a fixed market rate, so it should sit in a signed engagement before viewings begin.

Step 3: Add the buyer-side professional costs

SAR 9,000 plus SAR 3,500 equals SAR 12,500.

These are the costs a buyer controls and the first ones a buyer cuts. Measured against SAR 70,000 of tax and an asset of SAR 1.4 million, spending twelve and a half thousand riyals to confirm the title and the physical condition is proportionate rather than extravagant.

Step 4: Apportion the service charge to the completion date

SAR 18,000 for the year, of which the buyer owns the final quarter: 18,000 divided by 4 equals SAR 4,500 payable to the seller.

The seller has paid the whole year, so the buyer reimburses the unexpired part. Apportionments are small individually but they decide whether the closing statement balances, and a contract that ignores them leaves the parties to argue once the deed has already moved.

Step 5: Total the buyer position under an unallocated contract

Buyer bears the tax and half the brokerage fee: 1,400,000 plus 70,000 plus 20,125 plus 12,500 plus 4,500 equals SAR 1,507,125.

The all-in figure is about 7.7 per cent above the headline price. A buyer who budgeted the price and a small margin is now short, and shortness at completion is what forces people into bad decisions such as skipping the inspection or borrowing on worse terms.

Step 6: Test the same deal with the allocation agreed in advance

Seller bears the tax and their own brokerage share: the buyer pays 1,400,000 plus 20,125 plus 12,500 plus 4,500 equals SAR 1,437,125.

The difference between the two outcomes on identical facts is SAR 70,000, decided by one line in the contract. That line is worth more negotiating effort than most buyers spend on it, and it is far easier to settle before the price is shaken on than afterwards.

What changes the answer

• A different agreed brokerage percentage changes the fee and the tax on it proportionately.
• A financed purchase adds the lender's valuation and administration charges to the buyer side.
• A unit with an estate, several co-owners or a mortgage to release raises the adviser line.
• Completing early in the service charge year moves the apportionment towards the buyer.
• The treatment of a particular transaction can differ, so the amount depends on confirmation with ZATCA.

What the numbers tell you

• Budget an all-in figure, not a price, and set your margin against the all-in number.
• Settle the tax and brokerage allocation in writing at the same time as the price.
• Remember the tax on professional fees, which is the line people forget when quoting percentages.
• Agree the apportionment of service charges and utilities in the contract, not at the counter.
• Treat diligence spend as a proportion of the completion costs you already face, not as an extra.

Limits of this example

Every figure above is an illustrative assumption used to show the method, not a quote, valuation or market rate. Costs, rates, fees and regulations change and must be confirmed with the relevant authority, lender or supplier before you commit.

Domira handles the property side of a Saudi transaction end to end: inspecting the unit, reading the documents, valuing what is in front of you and managing the asset after handover. Tell Domira what you are buying, selling or letting and you will get a plain answer on what it is worth doing.