GCC Indirect Tax Weekly Digest

UAE FTA publications

Cabinet Decision on penalties relating to marking designated excise goods

The United Arab Emirates (UAE) Federal Tax Authority (FTA) has published a Cabinet Decision on penalties relating to the required marking of designated excise goods under the Digital Tax Stamp (DTS) scheme.

Cabinet Decision No. (33) of 2019 on Administrative Penalties for Violations of Procedures related to the Implementation of Marking Excise Goods sets out penalties for a range of violations for non-compliance with the DTS scheme.

The penalties listed are significant, ranging from AED 20,000 to AED 50,000 per incident.

For example, possessing or handling designated excise goods (defined as tobacco and tobacco products which are required to be marked under the DTS) which do not carry a mark is subject to a penalty of AED 50,000 and 50% of the excise tax due on the designated excise goods.

The Cabinet Decision is effective from 1 May 2019, the same date from which unmarked cigarettes are banned from being imported into the UAE.

Manufacturers, importers, and distributers of these products should familiarize themselves with the requirements of the DTS to avoid significant penalties for non-compliance. The full force of the penalties are therefore expected to apply from 1 August 2019, which is the date from which it is not permitted to supply cigarettes in the UAE which do not carry a mark.

KSA developments

Excise Tax scope expanded to sweetened beverages and e-cigarette products

The Kingdom of Saudi Arabia (KSA) General Authority of Zakat and Tax (GAZT) Board of Directors has approved amendments to the Excise Tax implementing regulations to expand the scope of Excise Tax in KSA.

The list of items subject to Excise Tax has been expanded to include the following:

• Sweetened beverages – 50%
• E-cigarettes – 100%
• Liquid used in e-cigarettes – 100%

According to the GAZT Decision dated 15 May 2019 announcing the amendments, Excise Tax is applicable with immediate effect on e-cigarettes and liquid used in e-cigarettes. A further Decision will be issued in future by GAZT regarding the effective date of Excise Tax for sweetened beverages.

Bahrain developments

NBR updates Imports and Exports VAT guide

The Bahrain National Bureau for Revenue (NBR) has updated its Imports and Exports Value Added Tax (VAT) guide.

The new version of the guide clarifies the rules relating to imports by non-resident suppliers. Specifically, the guide addresses a situation where a non-resident supplier is required to bring goods into Bahrain as part of a supply of goods where installation is a part of a construction service carried out in Bahrain.

As the ownership and risks associated with the goods transfer from the non-resident supplier to the customer when the installation/construction is completed, the goods will still be under the ownership and control of the non-resident supplier at the time of import.

If the customer is registered for VAT in Bahrain, they may import the goods under their CR number and VAT Account Number with import VAT payable upon import of the goods unless a VAT exemption at import applies.

As long as the supply by the non-resident supplier is not VAT exempt, the VAT-registered customer may fully recover the VAT paid on the import of the goods. This rule applies regardless of the customer’s usual input tax recovery entitlement. The customer must be able to prove that the goods were imported for the purpose of a taxable supply to be made by a non-resident supplier.

For supplies made in the above scenario which are standard rated, the VAT-registered customer will also be liable to self-account for VAT under the reverse charge mechanism on the supply of the goods with installation (including on the value of the goods), subject to the relevant tax due date rules applicable to the supply.

The guide has also been updated to clarify that import VAT can be recovered as input tax in the taxable person’s tax return for the tax period during which VAT was paid to Bahrain Customs Affairs, provided all conditions for input tax recovery are met.

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.