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The UAE has released its Excise Tax and FTP Executive Regulations

Another step closer to VAT implementation

The United Arab Emirates (UAE) has released its Excise Tax and Federal Tax Procedures (FTP) Executive Regulations. The Cabinet has also issued Cabinet Decision No. (38) of 2017 on Excise Goods, Excise Tax Rates and the Method of Calculating the Excise Price, which confirms the information previously announced that excise tax will be applicable to carbonated drinks at a rate of 50%, and energy drinks and tobacco products at a rate of 100%.  It also provides details of how to calculate the value on which excise tax should be calculated, and indicates that the Federal Tax Authority (FTA) will publish a standard price list specifying the value on which excise tax should be calculated for excise goods.

The Excise Tax Law is due to be effective from 1 October 2017. There will be a requirement to have an audited record of stock on 30 September 2017 for anyone holding excise goods.

Registrations and payments:

  • Manufacturers and importers of certain ‘excise goods’ will be subject to excise tax, as will the release of those goods from a designated zone and the stockpiling of those goods in certain cases.
  • Registration has already started on September 17, 2017. Anyone currently engaged in those activities must ensure that they register immediately through FTA.
  • Importers and manufacturers are liable to make a number of pre-declarations prior to the filing of the tax return which will be largely automated based on the pre-declarations.  For imports in particular this requires moderately substantial compliance requirements for each import and therefore businesses should analyze their ability to meet those requirements urgently.

Retailers:

  • Retailers will not have any tax obligations under the excise tax law as long as they are not considered to be “stockpilers”.
  • A “stockpiler” is the owner of “excess excise goods”. “Excess excise goods” is when the quantity of goods owned exceeds the business’ monthly stock level of the past 12 month period from 1 September 2016 to 31 August 2017.
  • Plus, if the business owns more than 2 months’ supply of excise goods then any excise goods in excess of the 2 months’ supply will be considered “excess excise goods”.
  • Retailers should consider whether they will fall within the definition of a ‘stockpiler’ at the soonest to ensure registration if necessary. 

FTA will start auditing businesses including retailers to check whether they should be registered for tax starting 30 September 2017 and will be subject to penalties for delayed registration and payment. Retailers should therefore assess where they stand GIVEN the implementation date.

The links to the documents are as follows:

  • Excise Tax Executive Regulations: 
    Arabic and English
  • FTP Executive Regulations: 
    Arabic and English
  • Cabinet Decision No (38) of 2017 on Excise Goods, Rates and Excise Price: 
    Arabic and English
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