June 27, 2022
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 allows for relief to be granted from accounting for, filing and payment of, excise tax on goods that are located within an excise tax designated zone in certain scenarios. The Clarification lists these scenarios and explains the process to be followed by the warehouse keeper and the taxable person to obtain the relief.
Scenarios and process where relief can be granted by the FTA
Deficiency, shortage, and wastage of excise goods
Disposal of excise goods
In both scenarios the warehouse keeper needs 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.
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 and wastage or when excise goods are intended to be destroyed.
For additional information on this alert, please contact:
Ernst & Young Consulting LLC, Dubai
EY LLP (United States), Middle East Tax Desk, New York