Requesting for Excise Tax Relief in the UAE for Missing or Deficit Goods

Requesting for Excise Tax Relief in the UAE for missing or deficit goods

Excise taxes are generally imposed on cigarettes, alcoholic beverages, soda, gasoline, insurance premiums, amusement activities, & betting, & typically make up a relatively small & volatile portion of state & local federal tax collections.

Rate of excise tax in the UAE 100 per cent on tobacco products. 100 per cent on energy drinks. 100 per cent on electronic smoking devices. 100 per cent on liquids used in such devices & tools.

What goods are subject to excise in the UAE?

  • Beer
  • Wine And Intermediate Products (For Instance Sherry And Port)
  • Other Products Containing Alcohol (For Instance Spirits)
  • Tobacco Products (For Instance Cigarettes, Cigars And Pipe/cigarette Tobacco)
  • Mineral Oil (For Instance Petrol, Diesel Oil And Lpg)

 

On 20 June 2022, the UAE Federal Tax Authority (FTA) published a new Public Clarification (Ref. EXTP007) edging the method of notifying the FTA in cases of deficiency or destruction of excisable goods within a Designated Zone (DZ), & the obligated process of receiving the approval of Excise Tax relief subject to meeting certain conditions.

The Public Clarification depicts two types of wastage with respect to excisable goods:

  • Wastage of excisable goods already released for consumption in the UAE (outside a DZ)

There will be no Excise Tax relief on products which have been subject to tax previously, but it will later be counted as wastage. For example:

– Goods that cannot be sold or used in business;

– Expired or damaged goods before they can be legally sold;

– Wastage during production; or

– Goods that cannot be sold due to lack of consumer demand.

  • Wastage of excisable goods within the DZ

Sometimes excisable goods are regarded as leaving the DZ & released for free circulation:

– Where there is a deficiency or shortage in quantity;

– Where there is a deficiency or shortage in quantity during the transfer of goods between DZs; or

– When goods are held in a suspension layout in accordance with the GCC Common Customs Laws.

As an exception to the general rule, a deficiency or shortage in quantity of excisable goods will not be released for use, depending on the following conditions:

– The warehouse keeper advises the FTA within 30 days of realizing the deficiency or shortage in the stock;

– There is a reasonable cause for the shortage or deficiency which is acknowledged by the FTA.

The production activity comprises multiple stages where exercisable goods are produced at every stage, the deficiency or shortage occurring from every stage should be declared separately.

Process for obtaining an Excise Tax relief from the FTA

Step 1: Submission of the lost & damaged declaration

The taxable person possessing the goods should inform the FTA within 30 days of discovering the shortage/deficiency by following the steps summarized below:

  • The taxable person will be required to fill out the lost and damaged declaration “EX203B” through the FTA e-services portal;
  • They will then submit the declaration, which will be automatically sent to the DZ warehouse keeper for approval;
  • The submission of the declaration by the taxable person & the subsequent approval of the DZ warehouse keeper should all be completed within 30 days from the date of discovery of the deficiency or shortage.

 

Step 2: FTA’s review of the declaration

The FTA will respond within 30 days from the date of receipt of the declaration on whether such deficiency/shortage is a result of a genuine cause.

The FTA’s decision would be as follows:

– Accepting the declaration & stated reason of deficiency or shortage & granting a full or partial relief of Excise Tax; or

– Rejecting the declaration where the reason provided was seen to be illegitimate, or the request is not submitted within 30 days from the date of discovery of the deficiency or shortage.

It is worth noting that where the declaration is related to goods intended to be disposed or destroyed, the FTA would inform the warehouse keeper whether any inspection is required prior to commencing with the destruction or disposal of the goods, or he can proceed with the same without FTA’s inspection.

In either case, the taxable person needs to give evidence of the destruction or disposal of goods prior to procurement of the relief from Excise Tax, for example destruction certificate from the respective authority.

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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