Oman issues excise tax Executive Regulations has been saved
Oman issues excise tax Executive Regulations
What do you need to know?
The Oman Ministerial Decision no. 51 of 2020 contains the anticipated Executive Regulations to the Excise/Selective Tax Law (publicised under Royal Decree No. 23 of 2019).
The Regulations published in the Official Gazette on 19 July 2020 and are effective from 20 July 2020 and provide implementing guidelines to the Excise Tax Law that came into effect on 15 June 2019.
The Executive Regulations highlight the rules, procedures and conditions for various aspects of Excise Tax including:
- Registration and de-registration;
- Returns, filings and records (including transitional requirements);
- Tax warehouse conditions of operation and procedures;
- Levy, exemption and suspension of Excise Tax;
- Tax collection and refund stipulations;
- Key powers and rights of the Oman Tax Authority (OTA) in relation to Excise Tax;
- Instances permitted for appeals of decisions of the OTA; plus
- Vital administration matters, including penalty provisions.
What do you need to know?
Businesses dealing with Excise Tax should consider implications arising from the regulations and review their approach to compliance obligations. Note in particular:
Registration: the regulations provide for the manner and form in which a person should apply for registration in accordance with the Excise Tax Law. An important clarification is that importers who bring in excisable goods on an “irregular basis” (for example only once every two years or so) are exempted from the registration requirements.
In addition, the regulations also set out stringent registration guidelines. A person who is required to be registered and deliberately refraining from registration, shall be ‘deemed’ to be registered and have all the attendant obligations. Remember that businesses dealing in ‘sweetened drinks’ should be mindful of the expansion in Excise Tax scope from 1 October 2020.
What is meant by ‘released for consumption’: Excise Tax is payable on the date on which the excisable goods are ‘released for consumption’. The regulations outline when the excisable goods are taken to be ‘released for consumption’ under different scenarios that include importation, production, and release of goods from Tax suspension status and the like.
The Excise Tax Law and regulations put businesses under the primary obligation to correctly determine Excise Tax liability. Many Excise taxpayers in our experience can get this wrong; in practice it can be difficult to determine liability and the point of taxability or when Excise Tax is due. You are advised to check, and get advice or consult if in doubt.
Excise Tax on lost, damaged or destroyed goods: lost, damaged or destroyed excisable goods are deemed to be consumed and subject to payment of Excise Tax, unless the impacted business can substantiate that the loss, damage or destruction was beyond its control. What is ‘beyond control’ is of course a matter of fact and determined on a case to case basis: businesses need to review their policies in this area. The regulations stipulate for example that an impacted business would have to communicate to the OTA loss, damage or destruction that qualifies (along with the supporting documents, reports etc.) within a period of 30 days from the date of knowledge of such an event. As an Excise taxpayer do you have the right processes, controls and procedures in place?
Compliance/Filing of Excise Tax return by importers: importers, whose activities are limited to import, and are not licensed to operate under a tax warehousing arrangement, are exempted from filing Excise Tax returns. The Regulations also provide that the threshold on the value of imports is 5,000 Omani Rial (OMR) in a tax period – a welcome relief for small importers.
Apart from this and regardless of whether an importer has to file Excise Tax returns or not, an importer is required to submit a statement providing details of excisable goods imported during a tax year. This statement needs to be submitted to the OTA within 30 days of the end of the tax year. Is your business set up to do this, if you are importing excisable goods?
Deduction of Excise Tax on excisable goods used for production: the regulations set out requirements and documents that need to be furnished (along with a return) to be able to deduct and set off Excise Tax paid on goods used in production of other excisable goods. The required documents include invoice copy of the excisable goods used in the production, statement by the producer of excisable goods used in production that Excise Tax has been paid on the goods in question, plus evidence that the excisable goods (which are subject to set-off) are actually used in the production of other excisable goods. Once again if your business uses excisable goods in production, do you have the procedures, processes and audit trail that permits you to claim deduction or set-off?
Tax warehousing: the regulations give guidance on setting up of a tax warehouse. Conditions/factors to consider include:
- The applicant must be registered for the Excise Tax, be ‘financially solvent’, and have not been convicted of any crime under the Excise Tax Law.
- The tax warehouse license may be granted by the OTA at its discretion, and normally valid for a period of one year, subject to further renewal.
- Tax warehouse license shall not be granted for places where the business transforms “concentrates, powders, gels or any extracts to excisable goods for direct consumption in such place”.
Tax suspension: different scenarios are set out under which excisable goods may be subject to tax suspension. These include cases where excisable goods are stored or received in a tax warehouse, the transfer or movement of excisable goods from one tax warehouse to another within Oman or more widely across the Gulf Cooperation Council (GCC) member states, and the transfer of excisable goods to designated exit points for export.
Tax exemption: scenarios for Excise Tax exemption include excisable goods received by diplomatic bodies, consulate bodies, certain international organizations and the like, as well as excisable goods carried or transported by passengers coming to Oman (except where such goods are for commercial purposes).
Tax refunds: detailed procedures, conditions and document requirements for refunds are set out in the regulations. The regulations also provide for certain specific requirements for claiming refunds on excisable goods which are released for consumption in other GCC member states. If your business is affected and eligible for refunds have right protocols been set up?
Maintenance of records: a five year period is specified during which relevant records and documents need to be maintained. These cover purchases, sale invoices, financial and income statements, registers of exported and re-exported goods, and registers of movement of excisable goods. It is important that businesses who intend to maintain these records electronically seek prior approval from the OTA. Good record-keeping is key in any tax compliance framework, particularly in our view in relation to excisable goods: is yours up to scratch?
Appeals and administrative penalties: the regulations define the manner in which an “aggrieved person” can file an appeal against tax assessments or amendments to tax returns made by the OTA. Note that such appeals must be submitted in Arabic.
Certain administrative penalties relating to non-compliance are set out too:
- Failure to file returns, violation of tax warehouse licensing requirements - penalty of not less than OMR 500 but not exceeding OMR 5,000.
- Seeking refunds on basis of incorrect documents, tax evasion amongst other non-compliance situations - penalty of not less than OMR 1,000 but not exceeding OMR 10,000.
Actions and Deloitte briefing
The release of the regulations is an important milestone for Excise Tax. Many aspects of the Excise Tax Law are clarified; there are bound to be gray areas and open issues, which may need some further guidance and clarification. The issue of the regulations themselves requires Excise taxpayers to review their compliance processes and adjust them as good practice dictates.