GCC Indirect Tax Weekly Digest
June 30, 2020
VAT and Customs duty rate increases
Following the initial customs duty rate increase announcement in the Kingdom of Saudi Arabia (KSA) that was supposed to be implemented on 10 June 2020 and the subsequent postponement of this measure, Saudi Customs have now published a revised (and shorter) list of goods on which the new (and higher) duty rates will apply. The increased duty came into effect on 20 June 2020.
The full list of affected commodities is currently available in Arabic and English and can be viewed here.
In addition, the standard Value Added Tax (VAT) rate in KSA is set to increase from 5% to 15% this week on 1 July 2020. GAZT has published an additional, more detailed guide in Arabic on the transitional provisions. For information about the transitional provisions applicable to existing contracts and suggested action, please refer to our alert.
FTA publishes Decision on DTS milestone postponement
The United Arab Emirates (UAE) Federal Tax Authority (FTA) has published a Decision on the postponement of the final phase of the Digital Tax Stamps (DTS) scheme.
Federal Tax Authority Decision No. 5 of 2020 extends the date from which it will not be permissible to supply, transfer, store or possess Designated Excise Goods (water pipe tobacco and electronically heated cigarettes) in the UAE which do not have a DTS-compliant stamp from 1 June 2020 to 1 January 2021.
Additional details regarding the extension are set out in Excise Tax Public Clarification EXTP006. The FTA has postponed the milestone due to the fact that businesses may have been unable to sell any remaining non-DTS compliant stock due to business closures resulting from COVID-19 precautions.
Tax Authority publishes Ministerial Decision on Excise Tax on Sweetened Drinks
Following the announcement of the levy of Excise or Selective Tax on “sweetened drinks” effective from 1 October 2020, the Oman Tax Authority (OTA) published Ministerial Decision No. 34 of 2020 in the Oman Official Gazette on 28 June 2020.
The Ministerial Decision amends the earlier Decision No. 112/2019 to include “sweetened drinks” within the scope and impose Excise Tax at the rate of 50% on these. Note:
- “sweetened drinks” are defined “as any drinks that contain sugar, or any of its derivatives or any other sweeteners. Sweetened drinks shall include concentrates, powders, gels, or any extracts that can be converted into sweetened drinks”
- The Decision specifies that the following are to be considered as sweetened drinks:
- athletic drinks
- powders and artificially flavoured concentrates that are used to prepare drinks
- fruit drinks
- fruit juice and nectars
- barley drinks
- prepared and canned coffee and tea drinks
- The conditions to be met for levying Excise Tax on sweetened drinks include:
- sugar or any other substance containing sugar was added during the production process of the drinks
- the drink is ready to drink, or it is prepared with water, or is mixed with crushed ice, or carbon dioxide, or a combination of these
- the drink is filled into bottles, or metal cans, or otherwise ready for consumption
- The scope of the terms “sugar” and “sugar substitutes” seems wide enough to cover most types of sweeteners:
- “sugar” includes sucrose, glucose, fructose, lactose, galactose, coco sugar and sugar cane; and
- “sugar substitutes” include Stevia, Sucralose, Saccharin, Aspartame, Neotame,
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- There are limited exclusions to the scope of “sweetened drinks”:
- 100% natural fruit and vegetable juices
- milk, dairy and their derivatives that contain at least 75% milk
- nutritional supplements and drinks for special nutritional and medical use
- any milk-based drink, which contains 75 ml of milk at least for each 100 ml of ready drink
- milk substitute drinks, including beverages that meet specified requirements.
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.