Tax Alert: Amendments in Saudi Arabian excise rules

The Board of Directors of the Zakat, Tax and Customs Authority (ZATCA) approved amendments to the Excise Tax Regulations. The amendments are mainly about the following two areas:

• Licensing of a designated place for the destruction of non-consumable excise goods; and
• Refunding excise tax related to such goods.

Non-consumable excise goods are those which are:

• Unfit for consumption; or
• Any other excise goods not consumed in Saudi Arabia.

To qualify for a tax refund, the destruction of non-consumable excise goods can be conducted either at a Tax Warehouse or a licensed place for the destruction of non-consumable excise goods. The latter must have:

• Electronic record-keeping system capturing information related to the excise goods kept for destruction;
• Video surveillance system capturing entry and destruction of excise goods; and
• Effective security control system restricting the unauthorized movement of excise goods.

Criteria to obtain a refund:

• Excise goods were offered for consumption in the Kingdom;
• Excise goods are or will become non-consumable in the Kingdom;
• The person who wishes to refund tax is registered for excise tax purposes and has paid the tax on non-consumable excise goods; and
• Goods are destroyed in a Tax Warehouse or a licensed place designated for destruction.

Application to seek ZATCA’s approval for the destruction of the non-consumable excise goods is subject to some conditions.

• ZATCA is to be notified at least 5 days before the destruction date, so they can participate.
• ZATCA must be provided with evidence proving the actual destruction.
• After the destruction, the taxpayer may apply for a refund of the excise tax it paid.

The Governor of ZATCA may approve postponing the payment of excise tax due at import for up to 45 days.

ZATCA can now decide on refund requests in whole or in part (previously: in whole only) and must refund the amount approved within 30 days of approval (resulting in a total of up to 90 days refund timeline).

Also, ZATCA can assess tax (being able to request any information/documentation related to the tax due) within 5 years from the date of the end of the calendar year related to the tax period or the date of tax due/refund (previously: not specified).

These amendments are welcomed as bringing a business-justified opportunity to refund excise tax paid on goods which are destroyed.

KPMG would be happy to assist the companies interested in the analysis of these new changes, as well as implementing respective processes aimed at qualifying for a refund. Please contact us through the details below if you would like to discuss this.