The Middle East and Africa Duty Free Association (MEADFA) is still unclear whether the impending 5% value added tax (VAT) on Gulf Cooperation Council Countries (GCC) will hit industry sales.

As reported, the MEADFA board earlier this year invited responses from its GCC members to determine how the January 1 2018 implementation in all six territories (Bahrain, Kuwait, Oman, Qatar, Saudia Arabia and the UAE countries) would be approached prior to the law’s introduction.

“We asked all our members to send us feedback, but we didn’t receive any,” MEADFA President Haitham Al Majali updates TRBusiness. “There are still no answers, but we will know very soon.”

A circular issued earlier this year stated that the new law was not clear with regards to the VAT’s treatment of duty free sales and sales made within airports.

A primary concern is the abolishment of duty free sales intra-GCC and the introduction of VAT refund rules.

FURTHER DISCUSSION ON RADAR

Further discussion between MEADFA and its members is understood to be taking place at next month’s conference in Beirut, Lebanon where the association will no doubt be looking to move swiftly to get clarity on the pressing issue.

Saudia Arabia’s finance ministry has already approved the executive regulation of the new system ready for its implementation on 1 January, documents seen by TRBusiness confirm, as other countries move to implement a framework before the deadline.

MEADFA reiterates that it will continue to support its members on the issue as it attempts to reach a consensus of action with regards to any possible impact as a result of the new law.

EXCISE TAX BOOST FOR DDF

Dubai has already introduced an excise tax on tobacco, energy and soft drinks, effective October 1, which is designed to precede the introduction of the new VAT law in January.

The new excise tax issued by the President of the UAE in August doubles the cost of energy drinks and a packet of cigarettes, including in duty free, with carbonated drinks subject to a 50% hike.

According to the UAE Government, the tax levy is designed to reduce the consumption of unhealthy and harmful commodities while also raising revenues that can be spent on beneficial public services.

Colm McLoughlin, Executive Vice Chairman and CEO of Dubai Duty Free welcomes the new rules, which exempt tobacco purchases made on departure and apply only to purchases over the 400 cigarette customs allowance on arrival.

“We think the introduction of excise duty is good for Dubai and good for the UAE, we are looking at it very positively from the point of view of Dubai Duty Free as it will indicate what good value we are offering, and the revenue is needed by the government.

“I’m expecting we will increase our tobacco sales. I do not see a problem with people trying to buy over the custom allowance – an allowance of 400 cigarettes into Dubai is very generous compared to other parts of the world.”