المملكة: Urgent: Excluding infant formula and energy drinks…a new draft for definitions of “selective” goods and calculating taxes
I introduced The Zakat, Tax and Customs Authority launched a new project through the “Reconnaissance” platform, which includes definitions of excise goods and the methodology for calculating the tax for concentrates, powders, gels, or extracts.
This comes within the framework of its endeavor to issue a comprehensive administrative decision that defines the scope of application of the excise tax, and establishes a clear definition of the goods subject to it, in addition to developing an accurate methodology for calculating the rate Mitigation for the purposes of calculating the due tax, and clear criteria for calculating the retail selling price of concentrates, powders, gels or extracts.
Definition of Tobacco Products
The excluded customs items include gum containing nicotine that helps in quitting tobacco use by It includes smoking, tablets, patches, sprays, nasal drops, or injections.
Energy drinks and their classification criteria
With regard to subparagraph “B” of paragraph “1” of Article Two of the Executive Regulations, the project clarified that what is meant by energy drinks is every drink that is marketed or sold as providing mental or physical stimulation, and may contain stimulant substances such as caffeine. Taurine, ginseng, guarana, or any substances with a similar or similar effect.
The definition also includes all concentrates, powders, gels or extracts that can be converted into energy drinks. This definition was included based on Resolution No. “106” issued by the Financial and Economic Cooperation Committee on May 4, 2017.
Definition of sweetened beverages
With regard to subparagraph “C” of paragraph “1” of Article Two of the Executive Regulations, the project specified that what is meant by sweetened beverages is any product to which a source of sugar or other sweeteners has been added, and is produced for the purpose of consumption as a beverage, Whether it is ready to drink or in the form of concentrates, powders, gels, extracts, or any form that can be converted into a drink.
Application of the selective tax
The project stated that the scope of application of the selective tax on sweetened beverages is according to the following. Sweetened beverages are subject to the tax if they contain added sugar or other sweeteners, including honey or any other sweetening materials that do not fall within the definition of added sugar.
The Authority confirmed that mixing natural fruit or vegetable juices is not considered a sweetener unless sugar or any other type of sweetener is added to it, noting that the tax is imposed on the total sugar content in the drink, whether natural, added, or derived from other sweeteners, according to the categories specified in the executive regulations.
It explained that drinks that contain artificial sweeteners in addition to sugar are counted against them. The tax is based on the total sugar content only, without regard to the amount of artificial sweeteners added.
Methodology for determining the dilution rate
The tax includes concentrates, powders, gels and extracts that meet the specifications of sweetened beverages, as it is calculated after dilution according to the instructions shown on the product. In the event that these instructions are absent or proven incorrect, the methodology for determining The dilution rate issued by decision of the Governor.
The Authority stressed that the scope of sweetened drinks also extends to include sweetened soft drinks, whether they are ready for direct consumption or in the form of concentrates, powders or extracts.
Beverages excluded from the scope of sweetened drinks
The Authority has specified in its new project a list of drinks excluded from the definition of “Sweetened drinks”, explaining that these categories are not subject to the tax on sweetened drinks in accordance with the approved controls.
These categories include energy drinks that are previously subject to a tax of 100% of the retail price, 100% natural fruit and vegetable juices, whether fresh, mashed, dried, powdered, or mixed with other liquids, provided that they do not contain It does not contain any type of source of sugar or sweeteners.
The project excluded milk and dairy products that contain at least 75% milk in the ready-to-drink beverage, as well as plant-based milk alternatives such as soy syrup with a content of at least 75%.
Infant formula
Exclusions also included infant formula milk, and diet foods used For special medical purposes, in addition to drinks prepared for nutritional and medical uses that fall within the Gulf technical regulations for packaged foods for special nutritional uses (“GSO654”), and foods used for medical purposes (“GSO1366”).
The authority indicated that sweetened drinks prepared at home or in restaurants are for the purpose of personal consumption and are not Commercial beverages, which are served in open, unsealed containers, are not considered to be within the scope of taxable sweetened beverages.
It also confirmed that milk-based beverages that contain no less than 75% milk in the final product are among the categories excluded from the definition of sweetened beverages.
Reconstituted whey
The project clarified that the types of milk included within the scope of exceptions include animal milk, reconstituted milk, milk powder, yoghurt, whey, and reconstituted milk whey, indicating that cream is not considered one of the components of milk included in this definition.
It clarified that the drink is classified as a “milk substitute” if it meets five basic conditions. Taken together, it must contain 120 mg of calcium per 100 ml, and be extracted from plant sources such as legumes, grains, nuts, seeds, or other plants.
The project added that among the conditions for classifying the drink as an alternative to milk is that it be able to be used for most purposes for which natural milk is used, that its density be almost similar to the density of milk, and that it does not contain any Gaseous components.
Definition of electronic smoking devices and tools
For the purposes of subparagraph “D” of paragraph “1” of Article Two of the Executive Regulations, the draft clarified that what is meant by electronic smoking devices and tools includes all devices and tools that are used for smoking, whether or not they contain nicotine or tobacco, and include the following customs items within a table The unified tariff for the GCC states includes electronic cigarette devices for frequent use, electronic hookahs, electric heating devices for cigarette coils, and components for electronic cigarettes, hookahs, and cigarette coils, except for batteries.
Liquids used in smoking devices
In the eighth clause, the project defined what is meant by liquids used in electronic smoking devices and tools as all liquids. The customs items used in these devices, whether they contain nicotine or not, include the following customs items within the unified tariff schedule for the Gulf Cooperation Council countries, which are cartridges containing nicotine for single use, packages of liquids or gels containing nicotine, and other products.
The Authority explained in its draft that sweetened beverages are classified according to subparagraph “C” of Paragraph “3” of Article Two of the Executive Regulations, based on the total sugar content in every 100 ml, including natural and added sugar and sugar resulting from any other sweeteners.
The dilution ratios written on the packages
It confirmed that the classification of concentrates, powders, gels and extracts that meet the definition of sweetened drinks depends on the sugar content in the final drink ready to drink after dilution, according to According to the dilution ratio guidelines written on the packages or within the product’s nutritional data.
The dilution ratio, as stated in the project, means the conversion factor that is used to calculate the amount of the final product after mixing the concentrate, powder, gel, or extract with water, ice, carbon dioxide, or any other liquids, according to the instructions contained on the package.
Cases of applying the dilution ratio Alternative
The Authority stated that the methodology for calculating the dilution rate for the purposes of calculating the tax due comes to address cases where instructions related to the dilution rates are not available or are considered incorrect.
If the analyzes show that adhering to the dilution rate written on the product does not lead to the actual result of the sugar content shown in the data, the Authority will An alternative dilution rate is applied to determine the correct category of sweetened drinks, and the volume of the drink used to calculate the excise tax.
The Authority confirmed that the person obligated to pay the tax is responsible for declaring the alternative dilution rate supported by technical evidence, and may rely on the dilution rates prescribed for similar products in terms of use, quality and specifications, in the absence of specific instructions for the product. Same.
Obligating producers to keep documents
The Authority stressed the need for the producer or importer to keep all documents explaining how to calculate the dilution percentage for sweetened drinks, and any evidence supporting the classification of these drinks within the categories specified in the regulations, provided that these documents are submitted to the Authority when requested for the purposes of verifying the accuracy of the classification or percentage. Declared.
If the package does not contain clear dilution instructions or nutritional information that allows calculating the sugar content in the final drink, the Authority may accept other evidence provided by the producer or importer to confirm the accuracy of the dilution percentage, provided that Articles “22 bis” and “4 Paragraph 3” of the Executive Regulations for the Excise Tax are adhered to.
Cases of applying a dilution factor Alternative
The Authority stated that it has the authority to apply an alternative dilution rate to concentrates, powders, gels and extracts in several specific cases, including: the absence of instructions regarding the dilution rate or nutritional information and the product not providing the necessary evidence, or the presence of a difference between the percentage shown on the packaging and the percentages approved for similar products, or the presence of reasonable doubts on the part of the Authority regarding the validity of the declared dilution rate. By the taxpayer.
In such cases, the alternative dilution rate is determined based on the average dilution rates for similar or similar products in terms of use, quality, specifications, or any other objective characteristics.
Criteria for calculating the retail selling price
In another aspect of the project, the Authority discussed the proposed standards for calculating the retail selling price for products that The definition of energy drinks or sweetened drinks applies to them, whether imported or local, in order to ensure the clarity of the methodology for calculating the excise tax accurately and fairly.
According to the proposal, the retail selling price of imported concentrates, powders, gels or extracts that are used in the production of other excise goods within a licensed tax warehouse will be the customs value of the good according to the unified customs system, plus It includes customs duties, burdens and expenses within the customs department before clearance, with the exception of value-added tax.
This determination aims to enhance transparency and facilitate the tax disclosure process for taxpayers, so that the mechanism for calculating the price is clearer and compatible with customs regulations.
Selling products to other parties
But if these concentrates are offered or Extracts for consumption in the Kingdom for the purpose of being used by another person licensed to produce selective goods within a licensed tax warehouse. The retail selling price shall be the highest between the actual selling price of the importer to the licensee before discounts and commercial offers, or the customs value plus fees and expenses within the customs department, provided that value-added tax is excluded in both cases.
This means that The price will be calculated based on the higher of the two options to ensure that the declared price is not reduced for the purpose of reducing the value of the tax due.
Price calculation for ready-to-drink drinks
In other cases that do not include the previous two items, the retail selling price of concentrates, powders, gels or extracts for energy drinks will be based on the retail selling price of the final ready-to-drink beverage that is prepared from them, According to the dilution factor specified in the instructions or nutritional data written on the packaging.
In the event that the instructions are not available or proven to be incorrect, the provisions of Paragraph “4” of Article Four of the Executive Regulations shall apply, which gives the Authority the authority to determine or amend the dilution factor to correct the classification and price.
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