Excise Tax

Public Clarification on Excise (Tax EXTP007)

Issued by Federal Tax Authority

All businesses in the UAE that manufacture, import or stockpile excise goods, or anticipate doing so, are mandatorily required to register for the Federal Excise Tax in the UAE.

Excise Goods have the following TAX rates:

  • Tobacco and tobacco products (100%)
  • Energy drinks (100%)
  • Carbonated drinks (50%)

From 1 December 2019, excise tax was also levied on:

  • Electronic smoking devices & tools (100%)
  • Liquids used in such devices & tools (100%)
  • Sweetened drinks (50%)

Some companies are needed to register for excise tax even when they are not manufactures or importers of excise goods. For instance, if anyone comes under the category of stockpiling of excise goods before the federal excise tax introduction. Another instant would be when the entity is not registered for excise tax in the UAE, but the excise goods are being discharged from a designated zone. Hence, dutiable activities cannot be carried out by any organization in the UAE unless excise tax has been registered for.

Procedure for Excise Tax Registration

Industries can register using the Online Excise Tax registration UAE link given on Federal Tax Authority portal. This procedure usually takes not more than 20mins. It is advised to make sure that all entries on the form are correctly saved. Please also note that in case you have inactive for 10 minutes or more you automatically get logged out for security purposes. Once the application has been approved, a Tax Registration Number will be generated, based on which the tax return can be submitted. Simultaneously the online excise payment will also be activated, and all services and payments related to excise tax will be readily available on the portal.

Documents required for Excise Tax Registration in the UAE

During the excise registration procedure in the UAE, the businesses (depending on the company profile) require submitting various relevant documents.

Hence, it is recommended that the following documents are available with the:

  • Trade License(s) (if applicable)
  • Certificate of Incorporation (if applicable)
  • Customs number(s) issued by Customs department(s) (if applicable)
  • Passport, Emirates ID of the managers/owners, and/or senior management
  • Official signatory documents
  • Articles of Association/Partnership Agreement/Club or Association Registration/Law or Decree (if applicable)
  • Bank Account details

In many cases, the copies of these credentials are required to be uploaded. Only the following file formats are accepted: PDF, JPG, PNG, & JPEG. The individual file size limit is 2 MB.

  • If you are a producer of excise goods in the UAE, there are specific declarations you are required to make based on your business activities. Here are few relevant scenarios described for you to better understand your reporting requirements. (https://www.allaboutvat.com/wp-content/uploads/Excise-Tax-Scenarios_Producers.pdf)
  • If you are an importer of excise goods, there are specific declarations you are required to make based on your registration status and business activities. Here are the common scenarios to help you understand your reporting requirements. (https://www.allaboutvat.com/wp-content/uploads/Excise-Tax-Scenarios_Importers.pdf)

Violations related to excise tax

FTA has the power to conduct audits and inspections any time & if any violation is found they will impose penal measures on those who do not comply with the law.

UAE Federal Tax Authority issues public clarification on excise tax

On 21 June 2022, the United Arab Emirates (UAE) Federal Tax Authority (FTA) published a new Public Clarification EXTP007 (Clarification) on excise goods. The Clarification sets out the scenarios where relief from excise tax may be granted for excise goods that are found to be deficient, shortage, considered as wastage or where goods are intended to be destroyed.

Cabinet Decision No. 37 of 2017 on the Executive Regulation of the Federal Decree-Law No. 7 of 2017 on Excise Tax (Executive Regulation) considers “deficiency,” “shortage” or “wastage” of excise goods when located within a designated zone, as having been released for consumption and therefore subject to excise tax.

However, as an exception to the above rule, the Executive Regulation grants relief from accounting for, filing & payment of, excise tax on goods that are located within an excise tax designated zone in certain scenarios. The Clarification lists these scenarios & explains the process to be followed by the warehouse keeper & the taxable person to obtain the relief.

Scenarios and process where relief can be granted by the FT

Deficiency, shortage, & wastage of excise goods
  • The FTA should be notified by the warehouse keeper, responsible for the excise goods, within 30 days of discovering the deficiency in, or shortage and wastage of, the excise goods.
  • The FTA accepts that the deficiency or shortage is due to a legitimate cause (e.g., force majeure, natural shortage and wastage, and shortage and wastage during production), & then allows the relief.
Disposal of excise good
  • The taxable person who intends to dispose of excise goods located within a designated zone, obtains prior approval from the FTA.
  • The FTA may wish to inspect the goods prior to granting its approval to apply the relief.

In both scenarios the warehouse keeper requires to provide sufficient proof to the FTA of the circumstances leading to the deficiency, shortage, wastage or why the goods need to be disposed of.

Implications

Taxable persons who produce or store excise goods within a designated zone, should comply with the process outlined by the FTA, in coordination with the warehouse keeper, to avail relief from accounting for excise tax on the deficient, shortage & wastage or when excise goods are intended to be destroyed.

For further clarifications and advice on Excise Tax in Dubai, please feel free to contact our team at Brooks Management Consultancies.

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