In an exceptional session on Sunday 16 of April 2017, the Kingdom of Saudi Arabia (“KSA”) Shura Council approved the KSA Excise Tax draft law, which is now pending approval from the KSA Cabinet ahead of the expected introduction of Excise Tax on selective goods during the second quarter of 2017. The final time frame is yet to be confirmed.
Further to the ratification of the GCC unified VAT and Excise Tax treaties, the Shura Council has recently approved the KSA Excise Tax draft law. The Excise Tax law is expected to be effective within 15 days following publication of the final text in the Official Gazette, according to the draft published on the General Authority of Zakat and Tax (“GAZT”) website. The implementation of Excise Tax by KSA follows the agreement of the GCC States on a wider GCC Excise Tax treaty, which sets the common rules and principles of a region wide Excise Tax system. The GCC Governments have been considering the need to diversify revenue streams away from hydrocarbon, and Excise Tax is typically seen as an effective tool in raising revenue while achieving broader government objectives. The provisions in the Excise Tax law are expected to be further developed in the Excise Tax executive regulations.
The detailed list of goods subject to Excise Tax in KSA has not been included in the Excise Tax draft law. However, based on the information published by the GAZT on its website the following goods are expected to be subject to Excise Tax in KSA at the following rates:
The Excise Tax draft law remains silent on this point. Based on the Excise Tax FAQ’s published on the GAZT website, the Excise Tax due is expected to be calculated on the retail selling price.
Excise Tax is expected to be levied upon the “release for consumption” of the excisable goods. The draft law does not further define what release for consumption shall mean.
We understand that this generally means the following:
Registration for Excise Tax purposes is expected for any person that undertakes any of the following activities in KSA:
No threshold is expected, so the above persons will in principle have to register for Excise Tax purposes irrespective of the size of their business. Certain exceptions might apply.
The GAZT has now published on its website an online version of a user manual to complete registration for Excise Tax purposes. Registered taxable persons are expected to file bimonthly excise tax returns.
The Excise Tax draft law introduces a strict penalty regime to be applied in cases of errors or tax evasion, and this is why it will be key to have the right systems and procedures in place to limit the taxable person's exposure.
The penalties included in the Excise Tax draft law are as follows:
The penalties are expected to be further detailed in the Excise Tax executive regulations.
The main expected compliance obligations for businesses are as follows:
If you are engaged in importing, exporting, producing, trading, storing or transporting excisable goods, the Excise Tax
system will have a significant impact on your business.
There is a relatively short time to consider the of the introduction of Excise Tax and to make the necessary changes. The amount of work required will depend on the size and complexity of your business and it is essential that you consider the impact now and determine how best to deal with it.
Registration open on the GAZT website. In an exceptional session on Sunday 16 of April 2017, the Kingdom of Saudi Arabia (“KSA”) Shura Council approved the KSA Excise Tax draft law, which is now pending approval from the KSA Cabinet ahead of th...
Chadi Abou Chakra
Partner, Indirect Tax and Fiscal Policy, PwC Middle East
Tel: +966 11 211 0400 Ext: 1858
Middle East Tax & Legal Services Leader, PwC Middle East
Tel: +966 56 704 9675
Partner, Middle East Customs & International Trade, PwC Middle East
Tel: +971 (0) 4 304 3936