May 2 2018  |  Industry News

Taxing times

By Claire Malcolm

The dual implementation of the newly introduced ‘sin tax’, and arrivals duty free unexpectedly falling under the scope of VAT, is having a double whammy impact on duty free prospects with the UAE and Saudi Arabia the first GCC nations to introduce both forms of taxation.

Saudi Arabia was first through the starting gate, introducing excise tax in June 2017, with the UAE following in October, and Bahrain in December; while both Saudi Arabia and the UAE kicked off the new year with the introduction of VAT.

According to Bernard Creed, Vice President Finance, Dubai Duty Free, who laid bare the bones of the fledgling legislation in a session at this year’s MEADFA conference, the rest of the GCC isn’t far behind.

“The legislation in Kuwait and Qatar is developed, but they still haven’t confirmed when they will bring in excise tax; and Oman is still lagging behind. Bahrain is expected to introduce VAT in Q3 or Q4 this year with the rest of the GCC countries set to bring it in by January next year,” he said.

Industry on the defensive

Generally payable on alcohol, cigarettes and soft drinks, excise duty (also known as the ‘sin tax’) may be a one-time non-refundable amount, but with the amount ranging anywhere from 50-100% - in the case of tobacco – there’s a skyrocketing end cost to the consumer.

VAT in both Saudi Arabia and the UAE is currently set at 5%, which is extremely reasonable compared to many international jurisdictions, and departures as well as onboard duty free remains tax-free, but the inclusion of arrivals duty free within the taxable scope has been an unexpected blow to the industry.

Said Creed: “The risk to our industry is that if you want a duty free sign over your arrivals shop, and you’re selling product such as tobacco, for example, and charging VAT and excise, is the whole concept of duty free being eroded? We believe that it is.”

Sharjah Duty Free has already stopped selling tobacco on arrivals, with Abu Dhabi set to follow suit as the category has effectively lost its competitive pricing advantage.

“The legislation defines arrivals a vatable but departures as not, so any movement between departures also means very different VAT or VAT refund scenarios,” he said, and added: “It influences so many aspects of our business, for example sales of our Millennium Millionaire tickets, online business and buy on departure, collect on arrivals – it’s really quite complex.”

The planned implementation of both forms of taxation across the rest of the GCC in the coming months is another area of industry concern, as Creed explained: “Potentially, within the next 12 months, anyone leaving our departures area and going to [other] GCC countries will be charged VAT, and we disagree with that.”

Brand News

July 17 2018

Coeur de Lion introduces mix-and-match…

German jewelry brand Coeur de Lion has unveiled its Autumn/Winter Collection 2018, designed by Carola Eckrodt to create universal…

By Hibah Noor

July 17 2018

Barton 1792 Distillery warehouse…

Barton 1792 Distillery, the bourbon distillery based in Kentucky, has reported that its warehouse 30 completely collapsed…

By Jas Ryat

July 17 2018

Hering Berlin explores the world…

Hering Berlin is one of the few authentic porcelain manufacturers in the world. Founder, designer, and owner Stefanie Hering…

By Hibah Noor

July 17 2018

Three of Diageo’s best bartenders…

The three best bartenders from the Diageo Global Travel World Class semi-finals have secured their places at one of the leading…

By Mary Jane Pittilla

July 17 2018

Godiva and DFS bring more flavor…

Belgian chocolatier Godiva and leading travel retailer DFS have exclusively pre-launched the…

By Jas Ryat

July 17 2018

Tito’s celebrates heritage with…

US distiller Fifth Generation is launching a limited-edition burlap (canvas) bag for Tito’s Handmade Vodka to mark the start…

By Mary Jane Pittilla

July 17 2018

Skross wins top travel adapter…

Two world travel adapters from Swiss brand Skross have been named “The Best Travel Adapters 2018” by the online magazine…

By Jas Ryat

July 16 2018

MyMe Unity System improves user…

The MyMe Unity System is the answer to making traveling with electronics easier. The unique cradle system and innovative…

By Jas Ryat

July 16 2018

New Worldwide USB Charger solves…

Modern travelers are compelled to pack different devices that require charging while on the go. Smartphones, laptops and…

By Jas Ryat

Copyright 2018 DutyFree Magazine. All rights reserved. Privacy Policy Sitemap