KSA Guide: What is Impact of VAT on Government activities in Saudi Arabia?

Value Added Tax is an indirect tax that gets imposed on the supply of goods and services at the distribution and production stages, having some exceptions. This value on consumption is paid and collected at each stage of supply chains.

As for government activities are concerned, specified rules are applied for examining whether these entities carry on Economic Activities for the purpose of VAT. The implementation of VAT in Saudi Arabia states that activities exercised by the Government as the public authority don’t get considered as an economic activity. These activities do not require getting registered for VAT.

VAT on Government’s Commercial Activities in KSA

In certain cases, a public body can have some other activities other than the designated functions by the state. Commercial activities of the public body can get viewed as Economic Activity. This is true because it doesn’t get considered when carried on by the government body in the capacity of the public authority.

How Does VAT in KSA Get Paid By The Government Body?

Government bodies, in a majority of cases, get subject to the VAT on its supplies by suppliers. Even though charges offered by the Government body as the public authority fall outside of VAT, it doesn’t entail that they don’t require paying VAT. Some government bodies can even request the VAT refund charged while carrying out public activities by the refund application.

In some circumstances, the government body requires acquiring shares in the companies that operate in Saudi Arabia. These companies should not be public bodies –where most ownership is by the Government body. Additionally, it must also not act in the public authority capacity. Thus, these companies get viewed to be carrying on the Economic Activity that similar to the private companies.