Andersen

Excise tax is an indirect tax that allows double benefits: It is not only centered around economic gains, but goes beyond to include health, environmental, and perhaps even ethical benefits. It is levied on unhealthy products that cause harm to health, environment and society. It motivates through exaggeratedly high prices, consumers to look for healthy alternatives.

The approved amendments to excise tax were published in the Official Gazette, Umm Al-Qura (https://uqn.gov.sa/?p=22209), and came into effect on the day of publication. These amendments include:

With exception to the conditions in Paragraph (2) of this Article, the governor of ZAKAT, Tax and Customs Authority may postpone the import tax due on the person obligated to pay within a period not exceeding (45) days in specific cases and in accordance with regulations determined by the Authority’s Board.

Among newly approved amendments:

First: Requesting a permit for goods destruction.

1- As per the law and approved regulations in the Kingdom of Saudi Arabia, the location approved for destroying excise goods is defined as following:

• A location licensed by the Authority for the destruction of non-consumable excise goods.
• A location affiliated to any of the government agencies in the Kingdom and licensed by the Authority to destroy non-consumable excise goods.

2- The abovementioned location must have at least an entire management system, to ensure the following:

• The ability to keep electronic records of stored and destroyed excise goods and the details of the registrant who submits to the Authority, for tax purposes, an application to destroy the goods in that location.
• Video surveillance systems to record date excise goods entry to the licensed location and date of destruction. This kind of systems allows to preserve and archive the process for a period of not less than five years.
• An accurate system including security and control measures, to monitor excise goods entry or removal from the licensed location, to prevent their removal without supervision.
• The Authority may request any other administrative requirements within the context of related terms and conditions.

3- To obtain a license for destruction location, a separate license application must be submitted to the Authority, using the form prepared for that purpose, provided that it includes at least the following information:

Information about the applicant:

•  Information about the location.
• Types of excise goods that can be destroyed in the location.
•  Destruction methods to be adopted in that location.
•  Information about the administrative system that will be used to record details about the goods and the destruction process.
•  Security and control measures followed in that location, allowing entry and destruction of excise goods, and preventing their removal from the location without supervision.

4- a natural person is not entitled to apply for a location permit for the purposes of excise goods destruction.

5- articles thirty-two to thirty-five of the Regulations shall be applied to everything related to licensing destruction locations, taking into account the requirements of different cases.

6- The applicant may request to suspend the authorization to destroy excise goods, by filling the requested form, provided that it includes at least the following information:

• Information about the licensee.
• Reasons for submitting a license cancellation request.

7- The Authority can cancel the license in case the approved location has not been used for its declared purposes for more than three months or following the regulations. In case the Authority decides to suspend or to cancel the license, it must inform the licensee with the decision specifying the effective date of suspension or revocation. The goods remaining in the location after the effective date of license suspension or cancellation, shall not be considered as destroyed and the registrar shall be responsible for moving them to another place designated for destruction and submitting a new application to the Authority for destruction in accordance with the conditions set forth in this Article.

Second: tax refund for non-consumable goods

1- The Authority shall refund the tax paid on excise goods offered for consumption in the Kingdom and which are or become non-consumable therein, for the persons registered for excise tax purposes. In the event that those goods are destroyed in a warehouse or any other place designated for destruction purposes and licensed by the Authority for that purpose, in compliance with Chapter Sixteen of the bylaw.

2- Non-consumable excise goods shall mean excise goods that are unfit for consumption, or any other excise goods that are not consumed in the Kingdom, provided that they were stored into a tax warehouse or any other place designated for destruction, and destroyed in that tax warehouse or designated place.

3- The registrant who wishes to recover the tax thereon in accordance with the provisions of this Article must first apply for approval to destroy these goods before actually destroying them.

4- Destruction requested must be submitted by the registrar using the form specified by the Authority, provided that it includes at least the following information:

• Details about the goods included in the destruction request, including the date they were released for consumption, quantity, unit of measurement on the basis of which the excise tax was paid, the amount that must be paid for them to the Authority, and the payment date.
• Details about the tax warehouse or the place designated for goods destruction.
• Evidence proving that the goods were entered into the tax warehouse, or the place designated for destruction.
• The method by which the destruction will be carried out in detail.
• A request to cancel the tax stamps placed on any specific Excise goods.
• A document stating that the concerned party is not entitled to receive, any amount inclusive of the excise tax paid for the goods subject to destruction request as compensation under an insurance policy covering losses or damages.

5- The destruction request must be submitted by the registrar no later than twelve (12) months from the date of release of the excise goods for consumption in the market and the request for destruction may not be submitted unless the total amount of tax paid in the application is equal to or more than SAR 3,000.

6- The applicant for the destruction request must keep the excise goods included in the application and store them in the same packing units while in the warehouse or in the destruction location, until the date of their destruction after the Authority’s approval. In case the goods were placed in a tax warehouse; they must be stored separately from any other excise goods.

7- The Authority shall inform the applicant of its decision within a period not exceeding (7) days starting from the working day following the date of application submission, otherwise the application shall be deemed accepted without conditions, and the Authority shall have the right to request any additional information before issuing its decision regarding the destruction request.

8- The Authority may approve goods’ destruction with or without specifying conditions. The conditions may include for example the supervision of the destruction process or obtaining a report from a third party to prove that these goods are not consumable, as a condition of approval of the destruction request. In the event that Authority’s supervising of the destruction process is conditional, the applicant for the destruction request must specify the date of destruction and notify the Authority within a period of not less than five (5) working days prior to that date, provided that the date of destruction corresponds to an official working day, and in the event that the Authority fails to appear on the date specified for the destruction, the condition of supervision shall be deemed to have been fulfilled. In the event that the Authority is not notified within the period specified in this paragraph, the Authority may consider the destruction request rejected.

9- After obtaining the Authority’s approval, the applicant must destroy the excise goods as specified in his application, within sixty (60) days from the date of notification of the approval; Provided that the goods are destroyed only inside the tax warehouse or in the place specified for destruction as per the destruction request, and under the supervision of the applicant for destruction. The destruction request shall not be considered complete unless the applicant, provides after the completion of the destruction process, the Authority with evidence proving the actual destruction of the excise goods (in form of a visual recording, pictures, reports, or other evidence specified by the Authority).

10- Registrant may apply for a refund of excise goods tax related to complete destruction applications in accordance with the provisions of this Article.

11- Excepted from provisions stipulated in Paragraph (6) of this Article, the Authority may allow the registrar to submit a refund request for excise goods that were destroyed before obtaining the Authority’s approval for destruction, provided that the registrar submits documents indicating the existence of exceptional reasons for that.

12- The redemption request shall be submitted using the form specified by the Authority, and the redemption request must be submitted within fifteen (15) days from the end of each redemption period, taking into account the following:

• The recovery request includes all destruction requests completed before or during each recovery period.
• Each redemption period is determined by two calendar months, and each fiscal year contains six redemption periods.
• Completed destruction requests may be included in any recovery request for any subsequent recovery period, up to a maximum of twelve (12) months from the date of approval by the Authority to the applicant of destruction requests referred to in Paragraph (9) of this Article.
• The Authority has the right to request any additional information before issuing a decision regarding the recovery request.

13- The registrant submitting the recovery request shall be responsible for the destruction of the excise goods. In case where the tax amount is incorrectly refunded to the registrant, the registrant is obligated to pay an amount equal to the refunded amount, in accordance with Article Seventeen of the Bylaw.

Article Fifty-Four: Issuance of a decision regarding tax refund requests and amending items as follows:

• No amendments.
• The Authority shall issue its approval or rejection, in whole or in part, with a notification to the applicant, stating the reasons behind rejection. Refund procedures must be finished and the amount returned within thirty (30) days from the date of approval of the refund request.
• The Authority may, for once, extend the period for issuing its decision regarding the recovery request referred to in Paragraph (2) of this Article to another similar period, provided that the extension decision is issued before the end of the first period and the applicant is notified.
• No amendments.
• The Authority shall refund the remaining amount after deducting any amounts in accordance with Paragraph (4) of this Article, through a bank transfer to the bank account specified by the applicant for the refund. The applicant for a refund request registered with the Authority for excise tax purposes may request that the approved refund amount be transferred to his own excise tax account, through the refund request.

Article Fifty-Five: the Authority’s prerogatives, auditing and implementing the law

1- The Authority may issue or amend an assessment of the obligations of persons who must pay the due tax, and anyone who has recovered or was exempted from the amount of tax within a period not exceeding five years from the date of the tax period or the date of refund or exemption from the tax, and the Authority’s employees may, for example:

• Entering tax licensed warehouses and places for destruction and any other locations where excise goods are stored.
• boarding any means used for excise goods transportation.
• Redirecting any means used to transport excise goods in the Kingdom.
•  disclosing information related to excise goods set to be destroyed.
• Requesting any information or documents to verify the obligations of the person with the levied tax.
• Taking or requesting a sample of any excise goods contained in transportation vehicles or in ant place used to store or transport excise goods.

2- The Authority’s employees may exercise all the competencies stipulated in Paragraph (1) regarding excise goods matters or if they have reasonable evidence to believe that their acquisition is in violation of the bylaw.

We believe that the excise tax is a real investment in Human resources. It aims to reduce the total consumption of harmful goods, to promote a healthy and environmentally efficient society, a sustainable lifestyle, and to enhance fiscal policy tools, leading to economic and sustainable growth.

P.S: This document is a translation and cannot be considered as legally binding. For any disparities or differences, please refer to the Arabic version.