1. INTRODUCTION
1.1. Implementing an Excise Tax Regime in The Kingdom of Saudi Arabia
The Kingdom of Saudi Arabia ratified the Common Excise Tax Agreement of the Gulf Cooperation Council (GCC) States, by Royal Decree No. M/51 dated 5/3/1438 (“the Agreement”). Pursuant to the provisions of the Agreement, the Kingdom of Saudi Arabia (“Kingdom”) issued the Excise Tax Law under Royal Decree No.(M/86) dated 27/8/1438 AH (“Excise Tax Law”), as well as the Implementing Regulations of the Excise Tax Law under decision of the Board of Directors of the General Authority of Zakat and Income Tax (“GAZT”) No. (9-1-17) dated 5/9/1438 (“Implementing Regulations”).
1.2. The General Authority of Zakat & Tax
GAZT, also referred to as “the Authority” herein, is the authority in charge of the implementation and administration of Excise Tax (which may be referred to hereinafter as “the tax”) in the Kingdom; in addition to the registration and deregistration of taxable persons for Excise Tax; the administration of Excise Tax return filing and Excise Tax refunds; and undertaking audits and field visits. GAZT also has the power to levy penalties for non- compliance with legal provisions relating to Excise Tax.
1.3. What is Excise Tax
Excise Tax is an indirect Tax levied on certain goods in the Kingdom of Saudi Arabia. Typically, the Tax is not directly levied on a final sale of goods to the end purchaser/consumer of Excise goods, but is collected from the producer, the importer (the source) or an (1) intermediary. The amount of Tax levied on the Excise goods is typically included within the price of subsequent sales, including the sale to the final purchaser.
Excise Tax is characterized as a ‘consumption’ Tax. The Tax is designed so that ultimately Excise Tax is levied in the country where, and at the time when, these Excise goods are “released for consumption” (regardless of where these are originally manufactured).
Within the Kingdom, Excise Tax is calculated based on a specified percentage of the selling price, or other specified value of those Excise goods.
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