Importers, distributors, and traders dealing in sugary and sweetened beverages, which are subject to 50 per cent Excise Tax with effect from October 1, 2020, can expect the new levy to apply to potential hundreds of brands and products, say tax experts.
Oman’s Tax Authority recently announced the inclusion of sugar-sweetened beverages in the scope of excisable products – also known as Selective Tax. The levy, which first came into force in the Sultanate on June 15, 2019, currently applies to five categories of products: carbonated drinks, energy drinks, tobacco products, pork, and alcohol.
Pending further clarity from the Tax Authority on the different types of drinks that broadly fall under the label of ‘Sugar-Sweetened Beverages’, local businesses can look at the experience of other GCC states that already have the levy on their statute books, tax experts point out.
According to multinational professional services firm KPMG, Saudi Arabia and the United Arab Emirates introduced an excise tax on sugar-sweetened beverages with effect from December 1, 2019. Bahrain and Qatar, however, are yet to announce the introduction of excise tax on sugar-sweetened beverages. In effect, the Sultanate is set to become the third GCC states to implement the tax on sugar-sweetened beverages starting in October.
Unlike excisable carbonated drinks, energy drinks, tobacco products, pork, and alcohol, which are clearly defined labels, the scope of sugary or sweetened beverages/drinks is likely to be very wide, says Deloitte, one of the ‘Big Four’ accounting organisations.
Sugary or sweetened drinks are likely to cover, among other products, all types of juices, sports drinks, fruit/malt syrups, pre-mixed ready to serve coffee and tea drinks, which contain sugar or any of its derivatives (regardless of the percentage of sugar contained). Also included are concentrates, powders, gels, extracts, or any other forms that can be converted into sweetened drinks, Deloitte points out.
A few likely exceptions, based on the tax regime already in force in the UAE and Saudi Arabia, are likely to include 100 per cent fruit juices (with no added sugar), beverages containing at least 75 per cent milk or milk substitutes, baby formula/food, or beverages consumed for special dietary/medical uses.
“Details will emerge shortly – if any volume of sugar or sweeteners presents within a drink causes it to fall within the expanded scope, this contrasts with experience in other countries which have implemented a ‘sugary drinks’ tax based on the volume of the sugar content included,” said Deloitte in a recent advisory to clients.
The new measure will have a bearing on, among others, producers or manufactures of sugary or sweetened beverages, importers, tax warehouse keepers, and stockists, who may have tax obligations at the date of implementation, such as retailers, supermarkets, restaurants, hotels, and Food & Beverage outlets.
“Non-compliance with the Excise Tax Law is a punishable offense and could entail significant monetary penalties including imprisonment, leaving aside the potential for reputational damage to your business. As a result, businesses should begin now to ensure they are thoroughly prepared for the changes,” Deloitte added in its advisory.