InsightsTax and Legal ServicesPwC Middle East

GCC Indirect Tax Newsletter June 2020 Edition

The United Arab Emirates (UAE)

Value Added Tax

Amendment of UAE VAT Executive Regulations

The UAE Cabinet issued a Cabinet Decision (No. 46 of 2020) on 4 June 2020 to amend Clause (2) of Article 31 of the Cabinet Decision No. 52 of 2017 - The Executive Regulation of the Federal Decree-Law No. 8 of 2017 on Value Added Tax.

The original text of Clause (2) of Article 31 stated:“For the purpose of paragraph (a) of Clause (1) of this Article, a person shall be considered as being ‘outside the State’ if they only have a short-term presence in the State of less than a month, or the only presence they have in the State is not effectively connected with the supply”.

This has been amended to:“For the purpose of paragraph (a) of Clause 1 of this Article, a Person shall be considered as being ‘outside the State’ if they only have a short-term presence in the State of less than a month and the presence is not effectively connected with the supply”. After combining the two conditions (a short-term presence in the State of less than one month and the presence is not effectively connected with the supply), the scope of zero-rating export of services is narrowed. Therefore, zero-rating the export of services shall not be applied where the non-resident recipient:• stays in the UAE for a month or more; or• stays in the UAE for less than a month but his presence in the UAE is effectively connected with the supply.

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We are pleased to share the January 2020 edition of PwC’s GCC Indirect Tax Newsletter on the latest developments in the GCC.

Customs

Amendment of proof of origin requirements and settlement of disputes thereof

Dubai Customs has issued Custom Policy No. 49/2020 on 14 June 2020 to replace Customs Policy No. 13/2005, concerning the acceptable documents for the purpose of poof of origin. The policy outlines the acceptable proof of origin and implications of failure thereof, in the following cases:

The Policy lists exceptions to produce a valid proof of origin, including: ● Imported vessels● Temporary admission goods● Transit goods

Furthermore, the Policy does not cancel the obligation to affix the mark of origin on goods, depending on the nature of the goods.

Please see the relevant link for reference: https://www.dubaicustoms.gov.ae/en/PoliciesAndNotices/Policies/DCP49_2020.pdf

Import case Proof of origin requirement

Implication of non-compliance

1. Goods imported into the local market from the rest of the world, without claiming preferential treatment

Detailed invoice containing proof of origin

A deposit of AED 1,000 shall be paid as a guarantee until an authenticated proof of origin is produced within 60 days

2. Goods imported into the local market from the rest of the world, with the intention of applying preferential treatment (i.e. 0% customs duty)

Proof of origin as prescribed in the applicable Free Trade Agreement (normally a Certificate of Origin)

The full value of applicable customs duties shall be collected as a guarantee deposit, until a proof of origin is produced

3. Goods imported into the local market from the free zones and customs warehouses

Detailed invoice containing proof of origin

A deposit of AED 1,000 shall be paid as a guarantee until an authenticated proof of origin is produced within 60 days

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https://www.dubaicustoms.gov.ae/en/PoliciesAndNotices/Policies/DCP49_2020.pdf

Reduction of fines on the customs cases

As part of Dubai Government initiatives to support businesses during the COVID-19 pandemic, Dubai Customs have issued Customs Notice No. 7/2020 on 24 June 2020 to reduce fines imposed on customs cases (customs violations, smuggling, etc.) by 80%.

The reduction in fines shall only apply to customs cases committed and finalized by seizure reports before 31 March 2020, and which are underway before the courts or customs grievance committee.

To access the reductions, importers should settle their customs case and pay any charges due by 31 December 2021.

Please see the relevant link for reference: https://www.dubaicustoms.gov.ae/en/PoliciesAndNotices/Notices/CN7_2020.pdf

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https://www.dubaicustoms.gov.ae/en/PoliciesAndNotices/Notices/CN7_2020.pdf

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Excise Tax Update

FTA updates digital and online services to streamline Excise Tax procedures related to shipping and customs clearance activities

The FTA held the “Fifth Forum of Freight Forwarders and Customs Clearances Agents”, where it showcased the updates it has made to its digital and online services recently to further facilitate and streamline tax procedures in general, and those related to shipping and customs clearance activities in particular.

Representatives from the FTA gave an explanation covering the mechanisms and criteria for applying “excise suspended customs duties” according to the GCC Common Customs Law and legislation issued to regulate the tax collection on Excise Goods where the UAE is not the final destination, provided that these goods meet the conditions for “temporary admission” as stipulated in the customs law.

Furthermore, implementing “suspended customs duties” procedures exempts importers of excise goods that meet legal requirements for the suspended status from paying excise tax on these good when they enter through UAE customs ports, and subsequently recovering these taxes upon the goods’ exit from the country.

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The Kingdom of Saudi Arabia (KSA)

Value Added Tax

Legal update - Amendments in the VAT legislation

1. VAT law A Royal Order Number A/638 dated 15/10/1441 H (corresponding to 7 June, 2020) was issued to enforce the application of the VAT rate increase in KSA effective 1 July, 2020 onwards. Article 2 of the KSA VAT law has been amended to reflect the VAT rate increase from 5% to 15%.

A detailed alert has been issued by PwC earlier explaining the amendments in the VAT law which can be accessed through the following link:https://www.pwc.com/m1/en/services/tax/me-tax-legal-news/2020/saudi-arabia-royal-decree-issued-amend-vat-law.html

The amended KSA VAT law is published in Arabic and can be accessed through the following link:https://gazt.gov.sa/ar/RulesRegulations/Taxes/Documents/%d9%86%d8%b8%d8%a7%d9%85%20%d8%b6%d8%b1%d9%8a%d8%a8%d8%a9%20%d8%a7%d9%84%d9%82%d9%8a%d9%85%d8%a9%20%d8%a7%d9%84%d9%85%d8%b6%d8%a7%d9%81%d8%a9%20%282%29.pdf

2. VAT implementing regulations In line with the directions of the Royal Order Number A/638, the Board of General Authority of Zakat and Tax (‘GAZT’) through its decision number 2-3-20 dated 9 June, 2020, published in the Official Gazette having reference number 4836 dated 19 June, 2020, has approved amendments in various Articles to the Implementing Regulations (‘the Regulations’).

The major amendment/addition in the Regulations inter alia include amendments in the provisions of Article 79 to incorporate the transitional provisions for VAT rate increase, amendments/clarifications in the provisions of Article 15 (nominal supplies) and amendments/additions in various provision to incorporate the VAT treatment on supply of real estate by individuals.

A detailed alert has been issued by PwC highlighting the changes in the Regulations, which can be accessed through the following link:

https://www.pwc.com/m1/en/services/tax/me-tax-legal-news/2020/saudi-arabia-amendments-implementing-regulations-pursuant-vat-rate-increase.html

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https://www.pwc.com/m1/en/services/tax/me-tax-legal-news/2020/saudi-arabia-royal-decree-issued-amend-vat-law.htmlhttps://www.pwc.com/m1/en/services/tax/me-tax-legal-news/2020/saudi-arabia-royal-decree-issued-amend-vat-law.htmlhttps://gazt.gov.sa/ar/RulesRegulations/Taxes/Documents/%d9%86%d8%b8%d8%a7%d9%85%20%d8%b6%d8%b1%d9%8a%d8%a8%d8%a9%20%d8%a7%d9%84%d9%82%d9%8a%d9%85%d8%a9%20%d8%a7%d9%84%d9%85%d8%b6%d8%a7%d9%81%d8%a9%20%282%29.pdfhttps://gazt.gov.sa/ar/RulesRegulations/Taxes/Documents/%d9%86%d8%b8%d8%a7%d9%85%20%d8%b6%d8%b1%d9%8a%d8%a8%d8%a9%20%d8%a7%d9%84%d9%82%d9%8a%d9%85%d8%a9%20%d8%a7%d9%84%d9%85%d8%b6%d8%a7%d9%81%d8%a9%20%282%29.pdfhttps://gazt.gov.sa/ar/RulesRegulations/Taxes/Documents/%d9%86%d8%b8%d8%a7%d9%85%20%d8%b6%d8%b1%d9%8a%d8%a8%d8%a9%20%d8%a7%d9%84%d9%82%d9%8a%d9%85%d8%a9%20%d8%a7%d9%84%d9%85%d8%b6%d8%a7%d9%81%d8%a9%20%282%29.pdfhttps://www.pwc.com/m1/en/services/tax/me-tax-legal-news/2020/saudi-arabia-amendments-implementing-regulations-pursuant-vat-rate-increase.htmlhttps://www.pwc.com/m1/en/services/tax/me-tax-legal-news/2020/saudi-arabia-amendments-implementing-regulations-pursuant-vat-rate-increase.html

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The amended VAT Implementing Regulations can be accessed through the following link (available in Arabic language only at the moment)::https://gazt.gov.sa/ar/RulesRegulations/Taxes/Documents/VAT%20Implementing%20Regulations_AR_As%20amended%20on%20June%209%202020_Fourth%20Edition_v.final.pdf

Link to the publication in Um-Al-Qura:https://www.uqn.gov.sa/lang/ar/pdf/viewer/1592564107081028800/1592564155000l

Practical updates – VAT Guides and circulars issued by the General Authority for Zakat and Tax (“GAZT”)

1. Extension of fiscal stimulus initiativesOn July 2, 2020 GAZT has announced an extension of some fiscal stimulus initiatives launched earlier in March 2020 which were valid till June 30, 2020. The extended initiatives and the corresponding extension validity dates are as follows:

*There is no prior approval required to exercise this option during the extended period of initiative as indicated by GAZT and the mechanism of reporting VAT on imports through the return will be activated by GAZT for the time being. While exercising the option to pay VAT through return, taxpayers will be required to abide by the input VAT deductibility principles mentioned in the Implementing Regulations. Where a person is not registered for VAT, the tax amount due will be collected in accordance with the usual process/procedure.

**GAZT will not undertake any measure to seize taxpayer’s properties as part of the collection enforcement process, nor will it apply any government service suspension against the taxpayer till the end of the extension period of this initiative.

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Type of fiscal initiative Extended until

Extension of approval of installments requests for taxpayers without requiring a down payment

September 30, 2020

*Deferral of VAT collection at Customs (to be reported through the VAT returns)

September 30, 2020

Speeding up the VAT refund process and inspections to be conducted later

September 30, 2020

**Seizure and services suspension August 31, 2020

https://gazt.gov.sa/ar/RulesRegulations/Taxes/Documents/VAT%20Implementing%20Regulations_AR_As%20amended%20on%20June%209%202020_Fourth%20Edition_v.final.pdfhttps://gazt.gov.sa/ar/RulesRegulations/Taxes/Documents/VAT%20Implementing%20Regulations_AR_As%20amended%20on%20June%209%202020_Fourth%20Edition_v.final.pdfhttps://www.uqn.gov.sa/lang/ar/pdf/viewer/1592564107081028800/1592564155000https://www.pwc.com/m1/en/services/tax/me-tax-legal-news/2020/saudi-arabia-royal-decree-issued-amend-vat-law.html

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2. New VAT registration process for individuals supplying real estateFurther to the amendment of the KSA VAT implementing regulations in relation to special provision for the VAT registration of individuals supplying real estate without commercial license, GAZT has launched the registration process on its website.

The registration process can be accessed through the following link:https://gazt.gov.sa/en/eServices/Pages/VatRequest.aspx

3. Guide on transitional measures GAZT has issued an English translated version of the guide explaining the transitional measures of the VAT rate increase.

The guide can be accessed through the following links (English and Arabic versions):https://gazt.gov.sa/en/HelpCenter/guidelines/Documents/Transitional%20Provisions%20Guidelines%20of%20VAT%20Rate%20Increase%20to%2015.pdf

https://gazt.gov.sa/ar/HelpCenter/guidelines/Documents/%D8%B2%D9%8A%D8%A7%D8%AF%D8%A9%20%D8%B6%D8%B1%D9%8A%D8%A8%D8%A9%20%D8%A7%D9%84%D9%82%D9%8A%D9%85%D8%A9%20%D8%A7%D9%84%D9%85%D8%B6%D8%A7%D9%81%D8%A9%20.pdf

PwC has issued a detailed news alert explaining the highlights of the guide which can be accessed through the following link:https://www.pwc.com/m1/en/services/tax/me-tax-legal-news/2020/saudi-arabia-guidance-issued-gazt-vat-rate-increase.html

4. Detailed Guide on the VAT rate increaseGAZT has also issued a detailed guide on the VAT rate increase which provides further clarification along with examples to the taxpayers to enable them applying the correct treatment for the VAT rate increase.

The guide is issued in Arabic and English languages and can be accessed through the following links:https://gazt.gov.sa/ar/HelpCenter/guidelines/Documents/VAT15.pdf

https://gazt.gov.sa/en/HelpCenter/guidelines/Documents/Change%20of%20VAT%20Rate%20to%2015%20GL.pdf

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https://gazt.gov.sa/en/eServices/Pages/VatRequest.aspxhttps://gazt.gov.sa/en/HelpCenter/guidelines/Documents/Transitional%20Provisions%20Guidelines%20of%20VAT%20Rate%20Increase%20to%2015.pdfhttps://gazt.gov.sa/en/HelpCenter/guidelines/Documents/Transitional%20Provisions%20Guidelines%20of%20VAT%20Rate%20Increase%20to%2015.pdfhttps://gazt.gov.sa/ar/HelpCenter/guidelines/Documents/%D8%B2%D9%8A%D8%A7%D8%AF%D8%A9%20%D8%B6%D8%B1%D9%8A%D8%A8%D8%A9%20%D8%A7%D9%84%D9%82%D9%8A%D9%85%D8%A9%20%D8%A7%D9%84%D9%85%D8%B6%D8%A7%D9%81%D8%A9%20.pdfhttps://gazt.gov.sa/ar/HelpCenter/guidelines/Documents/%D8%B2%D9%8A%D8%A7%D8%AF%D8%A9%20%D8%B6%D8%B1%D9%8A%D8%A8%D8%A9%20%D8%A7%D9%84%D9%82%D9%8A%D9%85%D8%A9%20%D8%A7%D9%84%D9%85%D8%B6%D8%A7%D9%81%D8%A9%20.pdfhttps://gazt.gov.sa/ar/HelpCenter/guidelines/Documents/%D8%B2%D9%8A%D8%A7%D8%AF%D8%A9%20%D8%B6%D8%B1%D9%8A%D8%A8%D8%A9%20%D8%A7%D9%84%D9%82%D9%8A%D9%85%D8%A9%20%D8%A7%D9%84%D9%85%D8%B6%D8%A7%D9%81%D8%A9%20.pdfhttps://www.pwc.com/m1/en/services/tax/me-tax-legal-news/2020/saudi-arabia-guidance-issued-gazt-vat-rate-increase.htmlhttps://www.pwc.com/m1/en/services/tax/me-tax-legal-news/2020/saudi-arabia-guidance-issued-gazt-vat-rate-increase.htmlhttps://gazt.gov.sa/ar/HelpCenter/guidelines/Documents/%D8%B2%D9%8A%D8%A7%D8%AF%D8%A9%20%D8%B6%D8%B1%D9%8A%D8%A8%D8%A9%20%D8%A7%D9%84%D9%82%D9%8A%D9%85%D8%A9%20%D8%A7%D9%84%D9%85%D8%B6%D8%A7%D9%81%D8%A9%20.pdfhttps://gazt.gov.sa/ar/HelpCenter/guidelines/Documents/VAT15.pdfhttps://gazt.gov.sa/en/HelpCenter/guidelines/Documents/Change%20of%20VAT%20Rate%20to%2015%20GL.pdfhttps://gazt.gov.sa/en/HelpCenter/guidelines/Documents/Change%20of%20VAT%20Rate%20to%2015%20GL.pdf

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5. Amended VAT guides

GAZT has also started issuing amended guides explaining the impact of VAT rate increase. As per the information available on the website, a new page has been added in the guides to cater the VAT rate increase (in both English and Arabic versions).

The guides can be accessed through the following link to the GAZT’s website:https://gazt.gov.sa/en/HelpCenter/guidelines/Pages/default.aspx

6.VAT treatment of liens and mortgages

GAZT has issued a Circular Number 2005001 explaining the VAT treatment in relation to provisions of collateral (liens and mortgages). The circular clarified the instances wherein transfer of ownership of the property shall be considered as ‘out of scope’ for VAT purposes or taxable as per the relevant provisions of the VAT law and Implementing Regulations.

The circular can be accessed through the following link:https://gazt.gov.sa/en/MediaCenter/Publications/Documents/APPLICATION%20OF%20VALUE%20ADDED%20TAX%20TO%20PROVISION%20OF%20COLLATERAL.pdf#search=circular

Link to PwC news alert issued in this respect:

https://www.pwc.com/m1/en/services/tax/me-tax-legal-news/2020/saudi-arabia-circular-vat-treatment-provision-collateral.html

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https://gazt.gov.sa/en/HelpCenter/guidelines/Pages/default.aspxhttps://gazt.gov.sa/en/MediaCenter/Publications/Documents/APPLICATION%20OF%20VALUE%20ADDED%20TAX%20TO%20PROVISION%20OF%20COLLATERAL.pdf#search=circularhttps://gazt.gov.sa/en/MediaCenter/Publications/Documents/APPLICATION%20OF%20VALUE%20ADDED%20TAX%20TO%20PROVISION%20OF%20COLLATERAL.pdf#search=circularhttps://www.pwc.com/m1/en/services/tax/me-tax-legal-news/2020/saudi-arabia-circular-vat-treatment-provision-collateral.htmlhttps://www.pwc.com/m1/en/services/tax/me-tax-legal-news/2020/saudi-arabia-circular-vat-treatment-provision-collateral.html

Customs

Extension of the Voluntary Disclosure Program

In January 2020, the Saudi Arabian General Authority of Customs (“Saudi Customs”) published guidelines introducing a Voluntary Disclosure Program (“VDP”) which was set to run up until 30 June 2020. The VDP was intended to enable importers to declare historic non-compliance with Customs Laws and/or Regulations in the Kingdom of Saudi Arabia (“KSA”), providing an opportunity to voluntarily approach Saudi Customs and correct any identified past non-compliances.

Saudi Customs has since announced a three-month extension to the VDP window, which is schedules to further run from 1 July 2020 until 30 September 2020.

The scope of the VDP will still remain as per the original announcement with corrections focused in particular on the following:

1.Inaccuracy of the information provided in the customs declarations relating to the value, origin or classification of the imported goods

2.Omission of circumstances that occurred after the submission of the customs declaration that should have led the importer to amend the information submitted to Saudi Customs

In extending the VDP, Saudi Customs took into account the disruptions to business caused by the Covid-19 pandemic and how it would have caused some importers to be unable to complete and submit their VDP applications within the initial period of 1 January to 30 June 2020. As a result, the announced three-month extension, will provided importers with additional time to take advantage of the incentive of not being subjected to the fines, penalties and/or criminal prosecution that would ordinarily apply in a case of non-compliance with the provisions of the GCC Common Customs Law.

Businesses engaged in import activities in KSA must consider this extension as a further opportunity to review their customs activities to identify any potential miscalculations of customs duty liabilities, which may have happened in the past and take advantage of the amnesty from the penalties and/or prosecution charges that in principle would apply in a cases where the non-compliance were to be detected by Saudi Customs during a Post Clearance Audit.

Increase in customs duty rates announced by Saudi Customs

In accordance to the Cabinet Decision No.559 dated 28/8/1441H (21/04/2020), Saudi Customs had published a list of products that were subject to increased customs duty rates, which were scheduled to be effective as of 10 June 2020. However, the Government of KSA later decided to amend the original list of products affected and the extent of customs duty increases.

The final published list now has a total of 38 Chapters impacted (reduced from the initial 57) and more than 1,000 tariff lines (from over 2000) of the KSA Integrated Customs Tariff have been confirmed to have affected by the increase in customs duty rates (effective as of 20 June 2020).

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The full list of products impacted items can be accessed through the link here on the Saudi Customs website.

For ease of reference, we have listed the main categories of goods that will be subject to higher customs.● Foodstuff● Mineral products● Chemical products● Plastic products● Rubber products● Leather products● Textile● Footwear● Base metals, e.g. steel, iron, aluminium, etc.● Cement● Ceramic● Machinery, equipment, electrical equipment● Toys● Furniture● Vehicles (only motor vehicles for the transport of ten or more persons - including the driver)● Other various types of manufactured goods

As the customs duty rates have been increased to levels reaching 10%, 15% and 20% in many of the above listed cases, it is critical for businesses importing goods in KSA to consider the possibility of reviewing their customs and international trade policies to ensure efficient duty management.

The announced increase in customs duty rates as of 20 June 2020 requires that importers in KSA start to consider the necessary changes required to manage the impact on their operations, and comply with the legal requirements in terms of declaring and paying the right amount of customs duty to Saudi Customs. It is also recommended that importers consider the appropriateness of reviewing their customs and international trade policies to address the impact of the new customs duty rates in KSA in an efficient manner.

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https://customs.gov.sa/sites/default/files/2020-06/%D8%A7%D9%84%D8%A8%D9%86%D9%88%D8%AF%20%D8%A7%D9%84%D9%85%D8%B3%D8%AA%D9%87%D8%AF%D9%81%20%D8%B1%D9%81%D8%B9%20%D8%B1%D8%B3%D9%88%D9%85%D9%87%D8%A7%20%D9%85%D8%B9%20%D8%A7%D9%84%D8%AA%D8%B5%D9%86%D9%8A%D9%81.pdf

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The Kingdom of Bahrain (Bahrain)

Value Added Tax

NBR has released FAQs and a notification form for obsolete stock

Following the guidance published in the VAT Retail and Wholesale Guide, the National Bureau for Revenue (NBR) has now issued further details on the VAT treatment of obsolete stock in the technical FAQ on their website. The FAQ section of the NBR’s website has been updated to include information on obsolete stock and the form to be used when notifying the NBR of the intention to dispose of such stock.

The link to the technical FAQs on the NBR website can be found below:https://www.nbr.gov.bh/t_faq/8

The link to PwC newsletter can be found below:https://www.pwc.com/m1/en/services/tax/me-tax-legal-news/2020/bahrain-nbr-releases-faqs-notification-form-obsolete-stock.html

NBR has launched a new payment method for VAT

NBR has launched a new payment method, in addition to the existing methods, which will now enable taxpayers to make VAT payments through the National eGovernment Portal using debit and credit cards.

The link to the Bahrain Portal can be found below:https://www.bahrain.bh/wps/portal/!ut/p/a1/lZDBbsIwEES_pQeO1m4Sm4RjDjQQIVUoFRBfqrUx4CoxgVp

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https://www.nbr.gov.bh/t_faq/8https://www.pwc.com/m1/en/services/tax/me-tax-legal-news/2020/bahrain-nbr-releases-faqs-notification-form-obsolete-stock.htmlhttps://www.pwc.com/m1/en/services/tax/me-tax-legal-news/2020/bahrain-nbr-releases-faqs-notification-form-obsolete-stock.htmlhttps://www.bahrain.bh/wps/portal/!ut/p/a1/lZDBbsIwEES_pQeO1m4Sm4RjDjQQIVUoFRBfqrUx4CoxgVp

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The Sultanate of Oman (Oman)

Excise Tax Update

Increase in the rate of excise tax on alcoholic beverages

The Oman Tax Authority introduced excise tax effective 15 June 2019. The products subject to excise tax, and their excise tax rates, were established in a Ministerial Decision (MD 112/2019). As per the decision, the excise tax rate for alcoholic beverages is set at 100%, however this was temporarily reduced to 50% for an initial period of six months, from the date of implementation of excise tax, with the potential for further extension at the discretion of the Tax Authority. No formal extension of the reduced excise tax rate was communicated after this initial six month period, and the reduced rate has been in force since.

After consultation with the relevant authorities, the Oman Tax Authority has decided to reinstate the original excise tax rate on alcoholic beverages to 100%, with effect from 1 July 2020.

Furthermore, Article 15 of the Excise Tax Law (RD 23/2019), states that in the event of an increase in the rate of excise tax on excise goods, every person involved in the import, production, trade or distribution of such excise goods shall notify the Tax Authority of the balance of such excise goods in stock with such a person, before the increase in the tax rate, and discharge the incremental excise tax, within a period of fifteen days from the date of the increase.

Hence, every person who has a stock of alcoholic beverages as of 30 June 2020, will be required to submit a transitional excise tax return and also pay any incremental excise tax due by 15 July 2020.

The decision to increase the excise tax rate on alcoholic beverages has been communicated by the Tax Authority by way of an email to impacted businesses.

Important considerations: The announced increase in excise tax rate to 100% from 1 July 2020 requires that businesses involved in the import, production, trade or distribution of alcoholic beverages start considering the necessary changes required to manage the impact on their operations, and comply with the legal requirements in terms of filing of a transitional excise tax return, and payment of the incremental excise tax, on or before 15 July 2020.

Businesses are also recommended to consider potential cash flow implications due to such rate change, as well as the pricing implications and changes to IT systems, as may be required.

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According to a recent statement released by the Oman Tax Authority, a 50% excise tax will apply on SSBs from 1 October 2020. These goods will be added to the existing list of excise goods, mentioned above.

In terms of the statement, SSBs are expected to include the following, for excise tax purposes:● any ready-to-drink beverages that contain added sugar or sweeteners; and● any concentrates, powders, gels or extracts intended to be made into an SSB.

Accordingly, canned juices, fruit drinks, sports drinks, caffeine drinks and some tea based products are expected to fall under the definition of SSBs (provided they contain added sugars or sweeteners) and will be liable to excise tax. However, 100% natural fruit juices, milk and its derivatives containing a ratio of not less than 75% milk, laban, nutritional supplements and drinks for dietary and medical use are not considered as SSBs and will be outside the scope of excise tax.

Further details relating to the specific definition of SSBs, sugar and sweeteners, and specific exclusions and inclusions from the definition of SSBs are expected to be notified under a separate Ministerial Decision to be issued by the Tax Authority.

Important considerations

In light of this announcement, businesses involved in the production, import, trade or distribution of SSBs should start considering the necessary changes required to manage the impact on their operations, and comply with the legal requirements in terms of obtaining excise tax registration and compliance with transitional rules including filing of transitional excise tax return and payment of excise tax, if any. Businesses are also recommended to consider potential cash flow implications due to the introduction of excise tax on SSBs, as well as the pricing implications and changes to IT systems, as may be required.

The link to the Ministerial Decision on the Ministry of Legal Affairs website can be found below:http://www.mola.gov.om/eng/legislation/decisions/details.aspx?Id=1492&type=D

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http://www.mola.gov.om/eng/legislation/decisions/details.aspx?Id=1492&type=D

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Antoni TurczynowiczIndirect Tax Partner, UAE+971 54 791 5259antoni.a.turczynowicz@pwc.com

© 2020 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details. This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice.

Jeanine Daou Middle East Indirect Tax Leader+971 56 682 0682jeanine.daou@pwc.com

Nadine Bassil Indirect Tax Partner, UAE+971 56 177 7591 nadine.bassil@pwc.com

Ken Healy Tax Partner, Bahrain+973 3840 0897ken.healy@pwc.com

PwC Middle East UAE, Bahrain, KSA and Oman Tax contacts

www.pwc.com/me

Carlos GarciaMiddle East Customs and International Trade Leader+971 56 682 0642c.garcia@pwc.com

Mohammed YaghmourZakat and Tax Leader, Saudi Arabia and Egypt+966 50 569 8572mohammed.yaghmour@pwc.com

Chadi Abou-ChakraIndirect Tax Partner, KSA+966 56 068 0291chadi.abou-chakra@pwc.com

Fehmi MounlaZakat and Tax Partner, Jeddah+966 56 271 3073 fehmi.o.mounla@pwc.com

Mohammed Al-ObaidiZakat and Tax Partner, Riyadh+966 11 211 0239mohammed.alobaidi@pwc.com

Ebrahim KaroliaTax Partner, Riyadh+966 56 890 3663 Karolia.ebrahim@pwc.com

Darcy WhiteTax Leader, Oman+968 9388 3900darcy.white@pwc.com

Maher ElAawarIndirect Tax Partner, UAET: +971 56 216 1109maher.elaawar@pwc.com

mailto:antoni.a.turczynowicz@pwc.commailto:jeanine.daou@pwc.commailto:nadine.bassil@pwc.commailto:ken.healy@pwc.commailto:c.garcia@pwc.commailto:mohammed.yaghmour@pwc.commailto:chadi.abou-chakra@pwc.commailto:fehmi.o.mounla@pwc.commailto:mohammed.alobaidi@pwc.commailto:ebrahim.karolia@pwc.commailto:darcy.white@pwc.commailto:mohammed.alobaidi@pwc.com