A Guide to International Estate Planning in Saudi Arabia

Introduction

For high-net-worth individuals and foreign investors, managing assets in Saudi Arabia requires a sophisticated approach to international estate planning. The Kingdom’s legal framework, which is based on Sharia law, creates a unique set of challenges and opportunities, particularly as it does not impose inheritance or gift taxes.

This guide offers essential information and practical strategies for navigating this distinct environment. It focuses on structuring wealth to preserve assets, provide for beneficiaries according to personal wishes, and leverage the Saudi tax system for optimal financial outcomes, all while ensuring full compliance with local laws.

Interactive Tool: Check Your Saudi Estate Planning & Asset Protection Options

Understanding the Saudi Legal Framework for Estate Planning

The Dominance of Sharia Law & Forced Heirship

In Saudi Arabia, the principles of Sharia law fundamentally shape inheritance and estate distribution, creating a framework that differs markedly from Western legal systems. Formally codified in the Personal Status Law issued by Royal Decree No. M/73 in 2022, these rules mandate a practice called forced heirship.

This legal doctrine, known as forced heirship, severely restricts an individual’s freedom to decide how assets located within the Kingdom will be distributed after death.

Forced heirship automatically allocates two-thirds of the estate to specific family members in shares fixed by law and grounded in kinship and religious obligations.

For example, a male heir typically receives double the share of a female heir of the same relational degree.

To qualify as a rightful heir under Saudi law, an individual must satisfy all of the following criteria:

• They must be alive at the time of the decedent’s death.
• They must not have caused the decedent’s death.
• They must be of the same religion as the deceased.

The Limited Role of Wills & Bequests in Saudi Law

While Saudi law permits testamentary dispositions, an individual may freely dispose of only one-third of their estate; the remaining two-thirds are governed by forced heirship. This limitation poses a challenge for anyone wishing to benefit individuals outside the prescribed list of heirs.

The Personal Status Law sets out several formal requirements for a bequest to be valid:

• Form of the Bequest – Article 174 permits the bequest to be made orally or in writing.
• Capacity of the Testator – Under Article 176, the testator must be of legal age and of sound mind.
• Nature of the Asset – Article 180 requires that the asset be lawfully owned by the testator and transferable under Saudi law.
• Beneficiary Status – Article 179 states that no bequest may go to an existing forced-heirship beneficiary unless all other heirs consent after the testator’s death.

Key Issues in Cross-Border Estate Planning for Saudi Assets

The Critical Importance of Situs for Your Assets

The concept of ‘situs’, which refers to the legal location of an asset, is a critical factor in international estate planning. Ultimately, situs determines which country’s laws will govern the asset and its distribution upon your death.

For instance, real estate physically located in Saudi Arabia is considered a Saudi-situs asset. Consequently, it will be subject to Saudi Arabian law regardless of the owner’s nationality or where they live, meaning:

• The property is bound by mandatory Sharia inheritance rules.
• Understanding this classification is essential for creating an effective cross-border estate plan.

New Opportunities with the 2025 Foreign Real Estate Ownership Law

A significant development affecting asset situs is the Law of Real Estate Ownership and Investment by Non-Saudis, which was issued by Royal Decree No. M/14 on 25 July 2025 and takes effect in January 2026. This law introduces new opportunities for foreign nationals to own property in the Kingdom, with key features including:

• Designated Ownership Zones: Foreign ownership will be permitted in specific geographic areas identified by the Real Estate General Authority (REGA).
• Expanded Eligibility: Ownership rights are extended to include non-resident individuals and foreign-incorporated companies, not just those with specific investment licenses.
• Restrictions in Holy Cities: While the general prohibition on foreign ownership in Makkah and Madinah continues, the law allows for narrow exceptions where Muslim foreigners can acquire limited property rights.

The Risks of Using Offshore Trusts for Saudi Assets

Relying on offshore trusts to manage assets located in Saudi Arabia is a high-risk strategy. A critical warning comes from the 2024 UK Supreme Court ruling in Byers & Ors v Saudi National Bank UKSC 51, which highlighted the ineffectiveness of such structures within the Kingdom.

The court affirmed that because Saudi law does not recognise the legal concept of a trust, the protections offered by a foreign trust may be invalid. Specifically, the legal landscape dictates that:

• A Saudi court will prioritise the legally registered owner of an asset.
• A valid transfer of legal title under Saudi law could extinguish a beneficiary’s interest under a foreign trust.

Strategic Estate Planning Vehicles for Saudi Wealth Preservation

Using Onshore Endowments (Waqf) for Family & Charitable Goals

In Saudi Arabia, an endowment, known as a waqf, serves as a unique and Sharia-compliant estate planning vehicle. It involves the permanent and irrevocable dedication of assets by an endower for a specific purpose, ensuring they are used according to the founder’s wishes for generations.

Furthermore, the General Authority for Awqaf (GAA) acts as the independent government body responsible for regulating and overseeing these endowments.

Sharia law recognises three primary types of endowments, allowing for tailored wealth preservation and philanthropic strategies:

• Charitable endowments (al-waqf al-khayri): These are established to benefit public welfare entities, such as mosques or organisations dedicated to assisting the poor and needy.
• Family endowments (al-waqf al-ahli): This type is designed to benefit the endower’s own family, including their children and subsequent descendants.
• Joint endowments (al-waqf al-mushtarak): A hybrid model, this endowment allocates a portion of its benefits to both charitable causes and the endower’s family.

To establish a valid waqf, several essential formalities must be satisfied. Specifically, these requirements include:

• The endower must be of legal age and sound mind.
• The assets being endowed must be fully owned by the founder.
• The endowment deed must clearly specify the type of endowment, its purpose, and the designated beneficiaries.

Leveraging Offshore Foundations for Greater Flexibility

For Saudi families seeking more flexibility than onshore options provide, expertly structured international trusts and foundations have become a viable alternative. Jurisdictions in the United Arab Emirates, such as the Abu Dhabi Global Market (ADGM) and the Dubai International Financial Centre (DIFC), offer robust foundation regimes that are increasingly used for wealth preservation.

A key advantage of a foundation is its inherent adaptability. Depending on the founder’s goals, it can be structured in several ways:

• To adhere strictly to Sharia inheritance principles.
• To reflect a more modern approach, such as an equal distribution of assets among family members.

Additionally, if properly constituted, these UAE-based foundations can also withstand forced heirship claims that are mandatory under Saudi law.

However, careful planning is essential for these structures to be effective. Crucially, the central management and control of the foundation must remain in the UAE, rather than in Saudi Arabia.

This geographic separation ensures that the foundation is governed by the laws of its jurisdiction and not subject to Saudi legal interpretations.

This distinction is particularly important given that Saudi law does not recognise certain foreign legal concepts like trusts, as affirmed in the UK Supreme Court case of Byers & Ors v Saudi National Bank.

A Guide to the Saudi Tax System for Estate Planning

Understanding Corporate Income Tax & Zakat Liabilities

Saudi Arabia operates a dual tax system for corporate entities, where the liability depends on the nationality of the shareholders:

• Companies owned by non-Gulf Cooperation Council (GCC) nationals are subject to a 20% corporate income tax on their adjusted profits.
• In contrast, companies owned by Saudi or other GCC nationals are subject to Zakat, a religious levy.

This religious levy is calculated at approximately 2.5% of the company’s “Zakat base,” which is broadly its net worth.

Furthermore, for entities with a mix of GCC and non-GCC shareholders, both tax obligations apply proportionately based on the ownership structure.

Minimising Real Estate Transaction Tax on Property Transfers

A key consideration in managing property assets is the Real Estate Transaction Tax (RETT), which imposes a 5% tax on most property disposals. However, a significant exemption exists that can be used as an effective lifetime estate planning tool.

This valuable exemption applies to gifts of real estate between specific family members. Consequently, the transfer of property is exempt from the 5% RETT when it occurs between spouses or relatives up to the third degree, allowing for tax-efficient wealth transfer within the family.

The Zakat Exemption for Waqf Structures

A significant tax optimisation opportunity became available from January 2023 for entities structured under a waqf.

An entity that is subject to Zakat can be exempt from this obligation if it is owned by a waqf established in Saudi Arabia. To qualify, a specific application must be submitted to the Zakat, Tax and Customs Authority (ZATCA) for approval.

The exemption is granted if the following conditions are met:

• The entity paying Zakat must be wholly owned, either directly or indirectly, by a waqf.
• The waqf must be legally established and registered within the Kingdom of Saudi Arabia.
• The disbursements from the waqf must be directed towards general charitable purposes, not for the benefit of a specific individual.

Administering an Estate in Saudi Arabia

The Saudi Estate Distribution Process Explained

The administration of an estate in Saudi Arabia begins with settling the deceased’s financial obligations. According to Article 198 of the Personal Status Law, the initial steps include:

• Paying for reasonable funeral and burial costs directly from the estate.
• Ensuring the settlement of all outstanding debts.

Only after these liabilities are cleared can the remaining assets be distributed.

The next phase involves obtaining a declaratory deed from the Personal Status Courts, which officially confirms the rightful heirs. This deed serves as the primary administrative requirement, especially since Saudi law does not mandate a formal probate process.

Once the heirs are legally identified, they can proceed with dividing the assets through several avenues:

• Amicable settlement: Arranged if all heirs are in agreement regarding the division.
• Adjudicated division: Applied for through the court by any heir if disputes arise.
• The ‘infath’ program: A government service providing specialists, such as lawyers and evaluators, to facilitate a fair liquidation and distribution of the estate.

The MoJ’s Digital Service for Financial Asset Distribution

The Saudi Ministry of Justice (MoJ) has streamlined the distribution of certain financial assets through a digital service on its Najiz.sa platform. This modernised process is designed to simplify and accelerate the administration of estates containing traditional financial instruments.

This service integrates directly with the Saudi Central Bank and the Capital Market Authority. Consequently, it automates the distribution of regulated assets by:

• Transferring funds in bank accounts and investment portfolios.
• Routing these assets directly to the legally recognised heirs, as identified in the court-issued declaratory deed.

Planning for Decentralised Digital Assets like Cryptocurrency

A significant challenge in modern estate administration is the handling of decentralised digital assets, such as cryptocurrencies and NFTs, which requires specialised crypto tax planning and custody. Currently, there is a legal gap in Saudi law, as no specific provisions govern the succession of these asset classes.

Without a clear legal framework or a succession plan, these digital assets risk being permanently lost upon the owner’s death. At present, the most practical tool available for managing their transfer is the one-third bequest, or wasiyya.

Utilising this tool provides key benefits, as it allows an individual to:

• Appoint a “digital executor” to oversee the process.
• Provide specific instructions for accessing and distributing these complex assets.

Conclusion

Navigating estate planning for assets in Saudi Arabia requires a thorough understanding of its unique legal framework, which blends Sharia law’s mandatory heirship rules with distinct tax optimisation opportunities. A well-structured plan is essential for protecting wealth, whether through onshore waqf endowments, offshore foundations, or careful management of real estate and digital assets.

To ensure your international estate plan is both compliant and effective, seeking specialised legal guidance is crucial. Contact PBL Law Group’s experienced international estate planning lawyers for a consultation today and take the first step towards securing your assets and providing for your beneficiaries.

Frequently Asked Questions