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GCC Indirect Tax Weekly Digest
October 10, 2019
FTA updates Clarifications user guide
The United Arab Emirates (UAE) Federal Tax Authority (FTA) has published an updated version of its Clarifications user guide.
Clarifications are the mechanism by which taxpayers may request the FTA’s written interpretation and position on specific uncertain tax matters. They are a critical tool in securing understanding of the FTA’s view of complex tax technical scenarios and transactions, and provide welcome guidance to businesses.
The guide has been updated to state that in most cases, it will take the FTA up to 45 business days to respond to a Clarification request (previously, the guide said that it ‘may’ take this long).
Further, the new version of the guide states that if a case is very complex, the FTA may require a further 45 business days to respond to the Clarification request. Such cases include where the FTA needs to consult non-tax legislation or review contractual or other factual information.
This potential increase in the timeline is in addition to the 45 business day extension that may occur if the Clarification application is incomplete or additional information is required by the FTA.
Given the extension in expected timelines to receive a response from the FTA, businesses should proactively identify issues requiring a Clarification from the FTA and submit these as early as possible. This will help to maximize the chances that a full response is received by the business within a timeframe that also meets commercial needs. In the event this is not possible, businesses may need to consider how best to protect their position whilst awaiting a response from the FTA.
FTA publishes Ministerial Decisions on Excise Tax
The UAE Federal Tax Authority has published Ministerial Decisions which address the implementation of the recently published Cabinet Decisions on Excise Tax in the UAE.
Ministerial Decision No. 236 of 2019 addresses the implementation of Cabinet Decision No. 52 of 2019 on Excise Goods, Excise Tax Rates and the Methods of Calculating the Excise Price. The Ministerial Decision states that the provisions of the Cabinet Decision, and the provisions of the Ministerial Decision itself, will come into effect as of 1 December 2019.
The decision which this latest decision refers to, Cabinet Decision No. 52, extends the scope of UAE Excise Tax to include sweetened drinks, electronic smoking devices and tools and the liquids used within them. Importantly, it had previously been reported in the media that the effective date of the Excise Tax expansion would be 1 January 2020. By the publication of this Decision, it emphasizes the need for businesses to urgently address the impact of the new Excise Tax changes given the reduction in timeline until the date of implementation on 1 December 2019.
The Ministerial Decision also lists specific Customs (HS) codes to clarify the application of Excise Tax on electronic smoking devices and tools and the liquids used in them. HS Codes covering sweetened drinks are not mentioned in this Decision however.
Finally, the Decision sets out the criteria for calculating the Excise Price of concentrates, powders, gel, or extracts that can be transformed into carbonated drinks, energy drinks, or sweetened drinks by mixing such goods with another product by the retailer. These provisions are understood to apply to products sold in concentrate form, which are mixed or diluted into sweetened drinks at the point of retail sale.
The second decision published, Ministerial Decision No. 237 of 2019 addresses the implementation of Cabinet Decision No. 55 of 2019 on Excise Price for Tobacco Products. The Ministerial Decision states that the provisions of the Cabinet Decision will also come into effect as of 1 December 2019.
GAZT publishes guide on reporting Excise Tax due
The Kingdom of Saudi Arabia (KSA) General Authority of Zakat and Tax (GAZT) has published a guide in Arabic on reporting Excise Tax due.
The guide sets out the procedures for calculating, reporting, and paying the amount of Excise Tax due. This includes guidance on determining the Tax Base of Excise goods. The Tax Base of Excise goods is the Retail Sales Price of the Excise goods or the ‘Standard Price’ of the Excise goods (exclusive of any Excise Tax or VAT), whichever is the highest.
Further, the guide includes a summary of the Excise tax rates as follows:
- 100% on tobacco products;
- 50% on soft drinks;
- 100% on energy drinks;
- 50% on sweetened drinks;
- 100% on electronic smoking devices; and
- 100% on the liquids used in electronic smoking devices.
This digest is for information purposes only and should not be construed as advice. It does not necessarily cover every aspect of the topics with which it deals. You should not act upon the contents of this alert without receiving formal advice on your particular circumstances.