Oman Excise Tax Expansion
The Oman Tax Authority has just announced that the Sultanate of Oman (Oman) will levy Excise Tax, also referred to as Selective Tax, on sugary and sweetened beverages at the rate of 50% effective from 1st October 2020.
Excise Tax was earlier introduced on 15 June 2019 and covered 5 products - carbonated drinks, energy drinks, tobacco products, pork and alcohol.
The scope of sugary or sweetened beverages/drinks is likely to be very wide and is expected to cover:
- All types of juices, sports drinks, fruit/malt syrups, pre-mixed ready to serve coffee and tea drinks, which “contains sugar or any of its derivatives” (regardless of the percentage of sugar contained).
- Concentrates, powders, gels, extracts or “any other forms” that can be converted into sweetened drinks.
Based on the experience here and other countries in the Middle East that have introduced Excise Tax on sweetened drinks there are likely to be very few exceptions. Following the implementation of similar rules in the United Arab Emirates (UAE) and Kingdom of Saudi Arabia (KSA) we can expect these to include 100% fruit juices (with no added sugar), beverages containing at least 75% milk or milk substitutes, baby formula/food, or beverages consumed for special dietary/medical uses. Details will emerge shortly - if any volume of sugar or sweeteners present within a drink causes it to fall within the expanded scope, this contrasts with experience in other countries which have implemented a “sugary drinks” tax based on the volume of the sugar content included.
Who is impacted?
This expanded scope of Excise Tax will impact most of the businesses dealing with sugary or sweetened beverages; and will have a primary bearing on:
- Producers or manufactures;
- Tax warehouse keepers; and
- Stockists, who may have tax obligations at the date of implementation, such as retailers, supermarkets, restaurants, hotels and Food & Beverage outlets – see below on transitional implications in particular.
On Day 1 businesses that have existing inventory of the new excise goods will have to file a transitional return and pay Tax due on the stock on hand.
Deadlines will be short - we understand businesses will only have a time period of 15 days from the date of implementation of the expanded scope of Excise tax, to file their transitional return and pay the Tax due to the Oman TA. These transitional returns may also be subject to audit, making it even more important ensure accuracy, and that proper back-up documentation and audit trails are maintained.
Key actions for affected businesses
Businesses affected should be considering the following as a matter of priority:
- Undertaking product classification exercises, to determine the products which fall to be treated as “sugary/sweetened beverages”
- Seeking clarification from the Oman TA, in cases of uncertainty – seeking early clarification is key to avoiding unnecessary delays in clearing products at the border and minimizing the risk of incorrect application of tax to products
- Applying to the Oman TA to include (or confirm exclusion) of products manufactured/imported in the Official Excise Tax list of products – delays in products being registered on this list could impact the clearing of products imported
- Analyzing potential impact of excise tax on current product costing, pricing and cash flows and commercial contracting arrangements
- Reviewing vendor, customer contracts, distribution agreements, agency agreements etc.
- Determining the impact on the current IT system and identifying changes required, including testing of reports/templates generated, in order to allow the business to comply efficiently and effectively
- Assessing the requirement to register for Excise Tax or amend the details of an existing registration
- Setting up processes to file Excise Tax returns efficiently and correctly paying applicable Tax on a quarterly basis
- Identifying transitional return requirements and making arrangements for stock counts to be undertaken at the correct time
Non-compliance with the Excise Tax Law is a punishable offence and could entail significant monetary penalties including imprisonment, leaving aside potential for reputational damage to your business. As a result, businesses should begin now to ensure they are thoroughly prepared for the changes.