You may have seen the media headlines about Qatar's new Excise Tax – dubbed a "sin tax" – which saw the price of alcohol, sugary drinks and tobacco in the country as much as double overnight. Here's an overview of the products and taxable persons affected.
Businesses that import, produce or store "health-damaging" or "special purpose" goods such as tobacco, alcohol and energy drinks in Qatar must now account for excise tax and file a transitional tax return if applicable.
The Excise Tax Law was signed on 13 December 2018 by Sheikh Tamim bin Hamad (Emir of Qatar) and has been in force since 1 January 2019. Qatar's excise tax introduction follows implementation of the tax by the United Arab Emirates, Kingdom of Saudi Arabia and Bahrain in 2017, and covers a wider range of products. In introducing the excise tax, Qatar aims to reduce the consumption of goods that are harmful to human health or the environment, and at the same time raise revenues that can be spent on public services.
Before we go over the key points to know about excise tax in Qatar, it's worth noting that late last year the country also agreed to establish the General Tax Authority (GTA), under the Minister of Finance. The GTA will oversee all tax and related laws, and improve tax compliance.
Excise tax rates for Qatar are set at the standard Gulf Cooperation Council (GCC) rates for "health-damaging goods" i.e. carbonated, energy drinks, tobacco and tobacco products. However taxes are also imposed on "special purpose goods" which are goods that are subject to certain conditions and authorisations in Qatar, and may include alcohol and pork products.
The tax rates set for the affected goods are as follows.
- Tobacco and tobacco products: 100%
- Carbonated drinks: 50%
- Energy drinks: 100%
- Special purpose goods: 100%
Those engaged in any of the following activities in Qatar involving the abovementioned goods must register for excise Tax:
- import of excise goods
- production of excise goods
- operation of a tax warehouse.
Registration deadlines and transitional period
Taxable persons must register with the GTA in the 30 days before intention or involvement in any of the taxable activities. However, there is a 90-day allowance after the expiry of the registration deadline and a transitional period (ending on 31 March 2019). Within this timeframe you can still register with the GTA and are not seen to be evading the excise tax, however, penalties can still be applied.
The obligation to submit the excise tax return and pay the due taxes is not limited to those who are carrying out taxable activities. All businesses that own / hold excise goods and intend to sell these goods are obligated to file and pay a one-time transitional excise tax return. These businesses would generally include local producers and importers, supermarkets, retail shops, hotels, restaurants and so on.
The approach is similar to that which has been implemented in other GCC states, and all of the abovementioned businesses should have submitted their transitional excise tax returns, and declared their tax due within 30 days (by 30 January 2019) of the start of the Excise Tax Law. Actual payment of the tax due can be delayed, but not by more than 30 days from the date of submission of the transitional excise tax return.
Excise tax refund
The excise tax paid may refunded to the taxable persons in the following cases.
- Export or re-export of excisable goods already released for consumption in Qatar
- Use of excise goods already released for consumption in Qatar to produce other excisable goods
- Movement of the excisable goods already released for consumption in Qatar to another GCC member state implementing excise tax.
Record-keeping and filing
Excise tax records must be kept for a minimum of five years from the end of the year to which they relate (as stated in Article 57 of the Income Tax Law), and made available for review at any time. The excise tax return is a self-assessment, however, the GTA has the right to rectify the tax return and proceed with assessment on a deem basis if the tax return or the supporting documents are not submitted.
The excise tax period should be a minimum one month but not more than one year, and VAT payments and returns should be filed before the end of the 15th of the following month from the end of the taxable period.
Non-compliance with the Excise Tax Law in Qatar
Businesses should expect penalties if they are found to not be compliant with the new txcise Tax law. Here are some examples of non-compliance and the associated penalty.
Penalty of 10,000 Qatari Riyal
- Failing to register, submit the excise tax returns
- Not paying the excise tax due
- Providing incorrect and inaccurate information
- Not providing the requested documents by the GTA
- Not abiding by the terms and conditions to store the excise goods in a tax warehouse
- Not notifying the GTA on the changes required to be reflected in the registration data
- Not keeping the necessary books and records.
A person failing to submit the tax return within the required period will be subject to penalties of 500 Qatari Riyal for each day it is delayed. But the amount should not exceed 18,000 Qatari Riyal.
A person failing to make the tax payment within the required period will be subject to penalties at 2% of the tax due amount for each day payment is delayed, but this should not exceed the tax due amount.
A person found to have committed a tax evasion offence will face a prison for one year and a penalty not exceeding three times the due tax or any of those punishments.
Excise taxes are paid when excisable goods become available for consumption, and the general rule for the excise tax is that it is included in the selling price of the products, which means all businesses need to modify their sales prices to reflect the same.
All taxable persons are required to file the excise tax return, but If your business is partly or wholly-owned by a foreign person and engaged in any of the activities related to importing, producing excisable goods or operating a tax warehouse; you are now required to file an excise tax return summarising the excise tax due to the GTA in addition to your annual corporate tax return.
The excise tax procedures in Qatar will be through the GTA, which is expected to use electronic portals to ease the process and apply refunds, and all taxable persons will need to likewise use the portals to carry out their excise tax procedures. All of this will most likely result in companies seeking the help of service providers – like ourselves – to assist in complying with the excise tax, as it is more difficult to manage in-house.
Talk to us
TMF Group's accounting and tax teams based in the middle east can help make sure your business is compliant with the new excise tax, and assist with ongoing tax administration in Qatar.
Have questions? Make an enquiry with us today.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.