There are two main types of taxes in financial statements:

Inclusive Taxes

These are taxes that are part of the selling price or purchase cost. These taxes are added to the total amount owed to the seller or supplier.

Exclusive Taxes

These are taxes that are not part of the selling price or purchase cost. They are calculated and added separately to the amount due.

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The Difference Between Inclusive and Exclusive Taxes

This distinction is important in analyzing financial statements and accurately determining cost and pricing structures.

Comparison Point	Inclusive Tax	Exclusive Tax
Method of Price/Cost Calculation	Tax is added to the basic price or cost of the good or service.	The basic price or cost of the good or service does not include tax, which is added separately.
Tax Display in Financial Statements	Tax appears within the value of sales or costs.	Tax appears under operating expenses or tax revenues.
Tax Impact on Price	The price paid by the consumer includes the tax.	The price paid by the consumer does not include the tax, which is added separately.
Tax Payment Responsibility	The seller bears the responsibility of paying the tax to the government.	The consumer bears the responsibility of paying the tax to the government.

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Examples of Inclusive Taxes

• Value Added Tax (VAT)
• Sales Tax
• Goods and Services Tax (GST) in some countries
• Purchase Tax in some countries
• Customs and Clearance Fees

Examples of Exclusive Taxes

• Personal Income Tax
• Income Tax
• Profit Tax
• Payroll Taxes and Wages
• Corporate Tax
• Employment Tax (Social Security)
• Value Added Tax (VAT) when separate from the price

Inclusive tax appears directly in the cost of the product or service, while exclusive tax is imposed on the company or individual separately from the price or cost.

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Payment of Inclusive Taxes in Saudi Arabia

In Saudi Arabia, companies are responsible for paying taxes included in prices, especially Value Added Tax (VAT).

Here are key points on this topic:

Value Added Tax (VAT)

• VAT is applied at a rate of 15% on most goods and services in Saudi Arabia.
• Companies are responsible for calculating this tax and adding it to the final price of the product or service.
• Companies are legally obligated to collect this tax from customers and pay it to the government.

Company Obligations

• Saudi companies cannot charge VAT to consumers separately from the price.
• Companies must include the inclusive tax in the advertised prices of products and services.
• Shifting the responsibility of tax payment to customers is considered tax evasion and exposes the company to penalties.

Legal Compliance

• Tax laws in Saudi Arabia obligate companies to pay taxes included in prices.
• Failure to comply may result in fines and penalties for companies.

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Conclusion

Therefore, in Saudi Arabia, companies bear full responsibility for paying taxes included in prices, especially Value Added Tax.