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Excise Tax Public Clarification on Deficient or Missing Goods Within a Designated Zone

Excise tax registration in UAE is a prerequisite for businesses that produce excise products in UAE. Excise tax is applied to most of the excise goods and services in the UAE. It varies widely throughout different countries, ranging from 0% to 100%, in the UAE, the amount of excise tax is as low as 50 % and as high as 100% on different types of excise products. This serves that one has to pay 50% to 100% of the profit made to authorities after excise tax registration in UAE. 

Do You Have to Pay Excise Tax if the Goods Are Deficient or Missing?

The short answer to the question is, yes, you have to pay excise tax on such goods as well. But the long answer is, not necessarily and always. There are some meager cases in which excise tax may be recovered for excise goods that are missing or deficient within an excise tax designated area. In other situations, a business may seek assistance from Federal Tax Authority or FTA for goods that are disfigured within the excise tax designated zone. The first step for the aid from FTA is to inform FTA about the damage to the goods and, its consent must be acquired in the following method; According to the rules and regulations of FTA, all goods that have failed to meet the anticipated quantity after production or goods that are rendered useless are considered as having been released to the public for utilization. These goods are not exempt from excise tax within an excise-tax-designated location. As an exception to this policy, an endowment might be allowed in the excise tax designated zone if the storehouse keeper in charge of goods follows these steps;

Cases in Which You Cannot Seek Relief From Excise Tax

Relief cannot be obtained for the goods made available to the public, subjected to the excise tax, and later rendered futile. For example, products may deteriorate or decay before they are sold, damaged beyond repair, or cannot be sold due to lesser demand in the market. In all such cases, no help can be given by the government or FTA.

Cases in Which Relief is Allowed From Excise Tax

In the case of a shortage of products, goods are eligible for relief under the following conditions;

  1. FTA is informed of the deficiency within 30 days after the shortage is uncovered
  2. The shortage is caused due to an appropriate reason credited by FTA

If these conditions are fulfilled, the business is not needed to pay excise tax. These goods must not be destroyed before permission is given by FTA.

Read More : UAE Excise Tax Law: Everything You Need To Know

How to Obtain Relief?

The taxable person has to fill and submit a form available through the personal account for the e-services portal given by the FTA after excise tax registration in UAE. It is then forwarded to the warehouse keeper, who must approve it after the approval, it is submitted to FTA. This procedure must be completed in less than 30 days after the shortage is discovered. One can also consult tax agents and advisors to go through these processes easily.

Necessary Documentation

The declaration sent to FTA must contain certain documents such as the Registration number of the warehouse keeper, the TRN of the owner, the reason for notification, the date of entry to the designated location, an account of the type of goods to be destroyed, and value of excise tax.

Legitimate Cause

The relief is given only if the reason for the deficiency is recognized as a legitimate cause. 

Following is a list of conditions that are considered a legitimate cause;

  1. Occurrences that cannot be controlled by a warehouse keeper or the taxable person such as earthquakes, downpours, or fires.
  2. The destruction of goods due to natural reasons such as spoiling or deprivation of moisture etc.
  3. If the shortage occurs due to some error during mass production.

Supporting Documentation

Supporting documentation includes;

  1. Any legal statement such as a police report or insurance affirmation.
  2. Picture or a video of the destruction of the product.
  3. Production reports represent the input and output of the manufacturing process.

Response by the Federal Tax Authority

The Federal Tax Authority gives a response within one month after the declaration is submitted in one of these ways:

  1. By permitting partial or full relief.
  2. By rejecting the relief if the cause is labeled as illegitimate.
  3. By informing the warehouse about the intent to inspect the product.

Seek Expert Consultation From Tax Agents in the UAE

Top tax agents in Dubai can effectively guide you on how to find relief on different types of excise products and under different conditions. Applying for such relief and following the procedures can be made easier if you seek the assistance of our experts. Further, we are a trusted point of conduct for excise tax registration in UAE. Get in touch with us today and we shall be happy to assist you! 

Read More : Guide to the UAE Excise Tax for Warehouse Keepers?

Ervee is a CPA with international experience in Tax and Accounting. He has over 12 years of experience in accounting and bookkeeping and over a year in VAT implementation, registration, and accounting in UAE. He regularly drives out inefficiencies in company operations and loves the challenge of helping clients find additional ways for an easier and improved compliance and verification of transactions.