GCC Indirect Tax Weekly Digest

UAE FTA publications

Upcoming FTA’s September 2019 awareness workshops on Excise Tax

Following the announcement by the Federal Tax Authority (FTA) of the expansion of the scope of Excise Tax to cover sweetened drinks, electronic smoking devices and tools and liquids used in electronic smoking devices and tools, the FTA has launched a series of awareness workshops taking place this month. The awareness workshops are planned to take place in Dubai, Abu Dhabi and Ajman and have been announced via the FTA website. It is anticipated that the FTA will go through the recent developments relating to new excise goods and also cover the new reporting requirements relating to Excise Tax which were announced via updated user guides in August.

These workshops present an opportunity for businesses to understand the requirements of Excise Tax obligations, and different sessions are advertised for current Excise Tax registrants and those businesses not currently registered for Excise Tax.

Deloitte’s Excise Tax alert

Deloitte issued an Excise Tax alert intended to assist you with navigating the new Excise Tax reporting requirements and declarations. These new changes are to take effect immediately and should be reflected in your next Excise Tax return due on 15 September 2019. Access the full details here.

KSA Developments

GAZT publishes a Guide on Excise Tax expansion and Excise Tax due under a transitional phase

The Kingdom of Saudi Arabia (KSA) General Authority of Zakat and Tax (GAZT) has released a new guide on Excise Tax. This guide provides further clarity on the expansion of the scope of Excise Tax to cover sweetened drinks, e-cigarettes and their consumable liquids, the ability of GAZT to apply a ‘minimum value’ to determine the Tax base for specific Excisable goods, and the application of the transitional rules for Excise Tax.  

A decision by the Board of Directors No.(2-3-2019) dated 10/9/1440 (15 May 2019) resulted in the expansion of the scope of Excise Tax from tobacco products (at a rate of 100%), soft drinks (50%), and energy drinks (100%) to also include sweetened drinks (50%), electronic devices and tools used for smoking, vaping and similar activities (100%), and liquids consumed therein (100%). The guide confirms the expansion of Excise Tax to cover e-cigarettes and their consumable liquids was effective from 15 May 2019, with Excise Tax to apply on goods in the category ‘Sweetened Drinks’ to be effective as of 1 December 2019.  A detailed clarification of the definitions of Excise goods was not provided in the guide. 

The guide confirms that GAZT has the power to apply a ‘minimum value’ with respect to certain Excise goods, which may result in a higher amount of Tax due where the minimum value is higher than the Retail Sales Price of the Excisable good. The guide provides examples indicating how Excise Tax should be calculated where the Retail Sales Price and minimum value differ. 

Finally, the guide provides information on the Excise compliance obligations during a ‘transitional phase’.  Broadly this is relevant on the entry into force of legislation resulting in a change in the Excise Tax base or rate. It is recommended that holders of excisable goods (particularly sweetened drinks, e-cigarettes and liquid consumables) review the guide to better understand the impact of the most recent changes on their compliance obligations, and any threshold test or exemptions that may apply.

GAZT releases a press release in Arabic to confirm the requirement to issue compliant tax invoices

Through a press release published in Arabic this week, the GAZT confirms that VAT registered businesses in the KSA must issue compliant tax invoices for VAT purposes as required by the VAT implementing regulations.

The GAZT clarifies that where the taxable person is supplying directly to customers i.e. individuals, the issuance of simplified tax invoices are permissible regardless of the invoice value. For supplies to businesses, a taxable person must issue detailed tax invoices where the value exceeds SAR 1000 or simplified tax invoices where the value is below SAR 1000.

Furthermore, the GAZT states that VAT should be calculated on the value of the supply after any discounts granted to the customers (i.e. net discount).

The GAZT also makes it clear that in a tax invoice, where there are different goods and/or services that are subject to different VAT rates, it must identify clearly the different rates shown on a line-by-line basis.  

The issuance of the press release on the subject of proper tax invoices highlights the importance, which the GAZT places on the issuance of compliant documentation. Businesses should expect this to be an area of focus by GAZT inspectors during tax audits and should review their current documentation to ensure it meets the requirements of the legislation.

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.