KPMG in Qatar provides an overview of the introduction of Excise Tax effective from 01 January 2019 in line with the GCC Unified Excise Tax Treaty and the new Income Tax Law No. 24 of 2018, which replaces the old income tax law No. 21 of 2009.
Qatar has announced the introduction of excise tax (“the excise tax”) effective from 01 January 2019 in line with the GCC Unified Excise Tax Treaty. The excise tax is imposed on certain goods, which are deemed to be damaging to consumer’s health.
Businesses engaging in importing, manufacturing and storing tobacco and its products, carbonated drinks, energy drinks and special purpose goods* (“the excisable goods”) will be affected by Qatar’s introduction of the excise tax. These businesses should assess their excise tax obligations carefully to ensure they are fully compliant and manage their tax in the most efficient way possible.
General principles of excise tax
In general, excise tax is a consumption tax that is imposed on a limited range of goods and in rare circumstances services. Unlike value added tax, it’s a single-phased tax imposed at production or on import of excisable goods. Businesses trading excisable goods are obligated to register, collect excise tax, submit periodical returns and pay excise tax to the local authority.
Excise tax in Qatar
Excise tax is imposed on tobacco and its products, carbonated drinks, energy drinks and special purpose goods on the excise tax value at the following rates:
The excise tax value of goods shall be the higher of:
The excise tax also includes additional provisions in respect of:
*Special purpose goods for excise tax purposes include goods that are consumed underspecific conditions and authorizations (e.g. alcoholic beverages and pork products).
Transitional Excise Tax Return
Businesses holding excisable goods for re-sale as of 01 January 2019 should submit a one-time transitional excise tax return by 31 January 2019 along with an audit certificate from an accredited Qatari auditor confirming the validity of inventory in respect of excisable goods exceeding QAR 50,000.
In addition to the transitional period requirements, only importers, producers and warehouse keepers will be required to register, file and pay excise tax starting from 01 January 2019.
Businesses engaging in or having the intention to be involved in excisable goods should submit an application for registration to the General Tax Authority in Qatar at the earlier of the following:
The introduction of excise tax will significantly affect customer prices on excisable goods. Businesses dealing with these goods should carefully review their pricing strategies, determine the full impact of the excise tax and ensure they understand what needs to be done to be fully compliant.
Businesses should consider the impact of excise tax on the following areas:
KPMG in Qatar can assist you with registration, inventory counting, submission of transitional excise tax return as well as evaluating the potential impact of the excise tax on your business in Qatar.
New Income Tax Law
On 17 January 2019, the Qatari government published a new income tax law No. 24 of 2018 (“the new income tax law”), which replaces the old income tax law No. 21 of 2009. The law was effective from 13 December 2018 and it’s expected that the Ministry of Finance will issue the Executive Regulations of the new income tax law in due course.
While the new income tax law contains only few substantive changes, the penalties for non-compliance have been increased quite dramatically. In addition, the tax law has been streamlined by moving some detailed regulations and procedures to the executive regulations. The following changes have been introduced by the new income tax law.
The new law empowers Qatar’s tax authority to conduct best judgment assessments based on any available data (such as industry comparisons, etc.) where taxpayers fail to submit the tax return or the related documents. It will allow the tax authorities to deal with non-compliant taxpayers more efficiently.
Commission paid to agents of foreign companies will only be deductible as per the limits provided in the executive regulations. Previously there were no specific restrictions on such commissions.
|Description||Penalty under old law||Penalty under new law|
|Late filing of tax return||
QAR100 per day, up to a
maximum of QAR36,000
QAR500 per day, up to a
maximum of QAR180,000
Failure to pay income
tax within the set period
1.5% per month, up to a
maximum of 100% of the unpaid tax
2% per month up to a
maximum of 100% of the unpaid tax
Delay in applying for
Late payment of
withholding tax within the set period
|None||2% per month up to 100% of the unpaid tax|
Failure to notify the
tax authority about the contracts,
agreements, and transaction executed
pursuant to the provisions of the law
Failure to comply with the r
egulations issued by the Minister of
Finance to enforce obligations of
(such as CRS, FATCA, CbCR, etc.)
|None||Up to a maximum of QAR500,000|
The executive regulations are yet to be issued. They should provide detailed guidance on the procedures as well as transitional provisions, which will detail how the new penalties will be applied. This alert provides a brief summary of the current update and has been written in general terms and therefore cannot be relied on to cover specific situations; application of the principles set out in the new law and executive regulations will depend upon the particular circumstances involved and we recommend that you obtain professional advice before acting or refraining from acting on any of the contents of this publication.
KPMG in Qatar can help you analyze the applicability of the new tax law and evaluate the potential impact of the new law on your business in Qatar.