KSA Guide: What is Impact of VAT on Non-Profit Organizations in Saudi Arabia?

The most current implementation of VAT in Saudi Arabia comes with exemptions, keeping in mind the impact on the overall society. Its purpose is to boost the economy without intending to raise the overall cost of living.

Thus, the law doesn’t impose VAT for Non-profit Organizations in Saudi Arabia, especially when the matter is about charitable supplies. For NGOs and other non-profit organizations, this move is beneficial.

Does VAT in KSA Apply to Non-Profit Organizations?

In principle, VAT applies to all organizations carrying on the Economic Activity. However, for VAT purposes, it’s not compulsory for organizations to seek a profit on the Economic Activities. On this note, the following are the ones that economic activity doesn’t depend on, irrespective of the activity:

#1 the prescribed activities don’t get restricted to the ones carried out for profit. A Taxable Person is an individual who carries on the Economic Activity independently for generating income. A non-profit organization can carry on the economic activity and require registering for the VAT procedure where it derives the income from making the taxable supplies of services and goods.

If non-profit organizations don’t carry out activities for generating income from activities, registering is fundamental. In spite of this, when an organization or individual seeks to make a profit, it indicates that it’s carrying an Economic Activity.

#2 for the legal entity’s establishment or obtaining the license for an activity (or even the commercial registration), requirements of the VAT law in KSA are separate from that of the Commercial Registration Law, Companies Law, and other laws.

COVID-19 impact on the global economy has been massive, and almost every sector is suffering from it. Thus, for NGOs, it’s a hard time. However, the NGOs would apparently make tax beneficial to the economy without getting detrimental to charitable actions.