The Ministry of Finance in Saudi Arabia issued a circular on 22 March 2018 clarifying the treatment of VAT on contracts concluded between VAT registered suppliers and government bodies before, on, or after 1 January 2018. The circular emphasizes that the VAT treatment depends on the terms of the signed contract/proposal and provides guidance for government bodies and public institutions on how to account for VAT under the KSA budget requirement.
The purpose of the circular is to clarify the obligation of government bodies and public institutions to pay VAT on taxable supplies received from suppliers and contractors based on paragraph 4.17 of the budget implementation guidance and GAZT circular No. 1439 /16/13338 dated 10/4/1439.
The government body shall pay the VAT on purchases and supplies made unless the contractor stated in his proposal that he would bear the VAT for the proposals submitted before 1 January 2018.
