Guidelines for Government Entities

Zakat, Tax and Customs Authority (ZATCA) has published the VAT guidelines for government entities, detailing the economic activity, VAT registration, supplies and input tax for government entities’ processes

As observed in the past few months, ZATCA continues its effort to clarify several grey areas in the Saudi tax framework by issuing new guides.

Amongst others, the guide issued on 12 August 2021, elaborates on the following:

Definitions of economic activity and Governmental agencies
Supplies between Governmental agencies
Input VAT deduction and the RCM
Contracts between Government agencies and private companies
Tax compliance obligations

Governmental agencies are defined broadly and will typically include all Saudi Governmental and state bodies. However, private companies fully/partially owned by such agencies will not be considered as a Governmental agency.

The crux of the guide is that if Governmental agencies practice the specific activities assigned to them by the state in accordance with any legislative instrument, then these activities do not constitute an economic activity.

Governmental agencies which carry activities other than those prescribed by the state will be considered as carrying on an economic activity. Such agency will need to abide by registration obligations for that portion of its activities. Partial input tax deduction rules and calculation examples are also provided for such instances.

Source

• Thomas Vanhee /Aurifer
• Zatca (in Arabic)

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