Tuesday, September 22, 2020

Overview of the Excise Tax Law

The Excise Tax Law (the “Excise Law”) was promulgated on 13 March 2019 by Sultani Decree 23/2019, and came into effect 90 days after its publication. The Sultanate is the fifth Gulf Cooperation Council (“GCC”) country to introduce an excise law, thereby implementing the unified GCC Excise Tax Agreement. 

The Tax Authority issued the Executive Regulations of the Excise Law on 19 July 2019. The regulations address details and rules of aspects of the Excise Law, including the process of registration, tax warehouse conditions of operation and procedures, tax suspension, tax exemption and penalty articles.

Excisable goods as defined by the Excise Law are “[g]oods that are harmful to human health or the environment; or luxury goods, whether such goods were produced locally or imported, and are subject to Tax in accordance with the provisions of this Law.” The broadness of the definition is narrowed down by Ministerial Decision 112/2019, published on 2 June 2019, which categorises excisable goods as: tobacco products, carbonated drinks, energy drinks, pork products and alcohol drinks. The rate applied on the excise goods is 50% on carbonated drinks and 100% on the rest. Currently there is a temporary reduction rate on alcohol drinks imposed by the Secretariat General of Taxation, Ministry of Finance. The Ministerial Decision has yet to be amended to reflect the change.  

The Excise Law differentiates between three types of persons:

  • Responsible Person: any individual that is associated with the person liable to tax, and shall replace the liable person in fulfilling his obligations related to the implementation of the provisions of this law.  
  • Registered Person: an individual registered with the Secretariat General. As an exception, importers who bring in excisable goods on an “irregular basis” (e.g., only once every two years or so) are exempted from the registration requirements. 
  • Person Liable to Tax: a registered person or any other person liable to pay tax. 
Registered Persons may appoint Responsible Persons and must notify the Secretariat General of the appointment in accordance with the Executive Regulations. Individuals required to be registered shall be subject to the Excise Law, even if they do not comply and register.

Examples of exemption from Excise Tax include excisable goods received by diplomatic bodies, consulate bodies, certain international organisations and the like, as well as excisable goods carried or transported for non-commercial purposes by individuals coming to Oman. 

Furthermore, the Excise Tax can be suspended if the excisable goods are stored or received in a tax warehouse, the transfer or movement of excisable goods is from one tax warehouse to another within Oman or across the GCC countries, and the transfer of excisable goods is to designated exit points for export. 

Administrative penalties imposed on individuals that do not comply with the Excise Law range from OMR 500 to OMR 20,000 and an imprisonment period of not less than two months and not exceeding three years.

The introduction of the Excise Law highlights the Sultanate’s shift in economic policy, specifically in the form of a growing appetite for imposing new taxes - a policy direction that the Sultanate’s neighbouring states have already taken. It is expected that the Sultanate may introduce other tax laws in the near future.