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VAT on contractors and subcontractor will be calculated in the following manners.
Contractor or subcontractors services particularly construction services would be considered as continuous services and VAT calculation depends upon the following arrangements.
1. Where contract have specified payment date at set milestone, than VAT will due at the earlier of
the due date , or:
the actual payment date
2. where there are progressive payments arrangement. than VAT will due at the earlier of
the issue of invoice, or:
the actual date of payment
The question is not very clear.
In KSA long tern projects are considered as continuous supply of services. This implies that vat input becomes payable on each progressive payment i.e. at the date of invoicing or the date of receiving payment whichever is earliest OR the due milestone date. In this respect vat input becomes payable on advance payments. Retention withheld however is not affected by above rule and hence input vat becomes payable on the full / gross amount of the valuation even if retention is withheld and not paid.
Correspondingly the above apply on subcontractors.
