Is VAT charged on government services?

Article 4 – Exclusions 1. The following Business Transactions shall be considered as Excluded Transactions: a) Any Business Transactions conducted by Government Entities in a sovereign capacity, and which are not in competition with the private sector, in accordance with the VAT Law. b) International passenger transportation services provided by an Airline via an Aircraft, where an Electronic Ticket is issued to the passengers. c) Any services provided directly to the passengers by an Airline, that are ancillary to the services mentioned in clause (b) of this Article, where an Electronic Miscellaneous Document is issued for such services. d) International transportation services in respect of goods, provided by an Airline, where an Airway Bill is issued for such services, provided that this exclusion shall apply only for a period of twenty-four (24) months from the date on which the Electronic Invoicing System becomes effective. e) Financial services that are exempt from VAT or subject to VAT at the zero rate, in accordance with Article 42 of the VAT Executive Regulation. f) Any other Business Transaction as may be determined by the Minister. Ministerial Decision No. 243 of 2025 – As published by the Ministry of Finance 4 2. The category of Excluded Persons shall be determined by a decision issued by the Minister. 3. Notwithstanding the exclusions under Clauses 1 and 2 of this Article, a Person may voluntarily issue, transmit, share, exchange and report Electronic Invoices and Electronic Credit Notes for Business Transactions. In such cases, the provisions of this Decision and all related decisions regarding the Electronic Invoicing System shall apply to them mandatorily, except the decisions related to the violations and administrative penalties.

Article 3 – Supply of Services3 1. A supply of Services shall be every supply that is not considered a supply of Goods, including any of the following: a. The granting, assignment, cessation, or surrender of a right. b. The making available of a facility or advantage. c. Not to participate in any activity, or not to allow its occurrence, or agree to perform any activity. d. The transfer of an indivisible share in a Good. e. The transfer or licensing of intangible rights, for example rights of authors, inventors, artists, rights in trademarks, and rights which the legislation of the State deems to be within such category. 2. As an exception to Clause 1 of this Article, the functions of a member of a board of directors, performed by a natural person appointed as such, for any government entity or private sector establishment, shall not be considered a supply of Services. 3 Article amended as per Cabinet Decision No. 99 of 2022. Cabinet Decision No. 52 of 2017 and its amendments – Unofficial translation 3 Article 3 (bis) - Exceptions of Supplies 4 1. The following shall not be considered a supply: a. The grant or transfer of ownership or disposal of government buildings, real estate assets and other projects of a similar nature from a Government Entity to another Government Entity. b. The grant or transfer of the right to use, exploit or utilise the government buildings, real estate assets and other projects of a similar nature from a Government Entity to another Government Entity, including any granted or transferred right of use, exploitation or utilisation as of 1 January 2023. 2. For the purposes of Clause 1 of this Article, Government buildings, real estate assets and other projects of similar nature shall mean the following: a. Government Entities’ premises. b. Government capital projects. c. Government infrastructural projects. d. Real estate assets utilised and used by Government Entities. e. Real estate assets allocated and utilised to serve a public utility and for public use. f. Developed Government land. 3. The scope and inclusions of government buildings, real estate assets and other projects of a similar nature shall be determined by a decision issued by the Minister.