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Federal Tax Authority Announces Amendments to Excise Tax Law

To change a few clauses of the Federal Decree-Law 7 of 2017 on Excise Tax UAE, a new Federal Decree-Law No. 19 of 2022 has been published. These excise tax amendments go into effect on 14th Oct 2022. Furthermore, on 13th Oct 2022, The Federal Tax Authority published a recent public clarification (EXTP009) outlining the articles that had been changed and providing instructions and justifications for the most significant modifications made. Amendments in excise tax are mainly covering topics like;

  • Those who haven't been required to register
  • The deadline for filing claims
  • Paying Percentages Received for Excise Tax
  • Timespan to submit volitional disclosure

We will review these major changes one by one;

1. Registration Exemptions

Despite affecting their responsibility to pay the applicable excise tax in UAE on the importation, individuals importing excisable products for non-business reasons are exempt from registration requirements.

This exclusion only exempts the individual from regulatory enrolment action; it does not absolve them of any potential excise tax debt or administration fines.

2. Amounts Acquired as Excise Tax to Be Paid

Any sum that is shown as an excise tax on an invoice or that is gathered from a consumer as an excise toll must be remitted to the administration and must be handled according to the rules established for owed taxes. This is applicable in all circumstances, according to EXTP009, even when an excise tariff was paid on non-excisable items.

3. Period for Submitting a Voluntary Acknowledgment

The change makes it clear that taxable individuals must submit a voluntary disclosure not afterward than five years after the conclusion of the applicable tax duration.

4. Limited Period

The period that the Authorities may undertake an Auditing or make a Tax Evaluation has been outlined in a new item of the Act. Five years after the conclusion of the relevant taxable period, Federal Tax Authority is generally prohibited from taking any step, including starting an examination or issuing payroll taxes. After the passage of 5 years, the Federal Tax Author may, nevertheless, carry out an audit or deliver a tax evaluation to a taxable individual in the given situations:

  1. If the taxable entity was informed of the auditing before the passage of five years and the audit is finished or the assessment is imposed within four years of the date of the announcement.
  2. If the auditing or evaluation pertains to a willing revelation made in the 5th year following the close of the financial year, as long as the auditing is finished or the review is made in under a year of the time the voluntary disclosure was made. A voluntary revelation can be made after five years have passed since the ending of the applicable tax period for excise tax UAE.
  3. The Federal Tax Authority may perform auditing or issue an evaluation in cases of evading taxes within fifteen years of the conclusion of the tax timeframe in which the violation happened.
  4. The Federal Tax Authority may perform a tax audit or issue a tax assessment if tax registrations are not completed within fifteen years after the mandatory registration deadline.

All enterprises coping with excisable commodities are recommended to evaluate their historical tax filings and dealings to verify adherence with the Legislation because the utmost period to modify prior filings is only five years. To make certain that the necessary taxes are paid to the FTA, it's also advised to maintain correct documentation of the excise tax imposed.

Read More: How to Request for Excise Tax Relief in UAE for Missing/Deficient Goods

What Products Are Free From Excise Tax?

Primed drinks with a minimum of 75% milk, infant food, and bakery items consumed because of dieting, and drinks known for their medicinal and healing effects are among the list of items exempted from excise taxation. Items are generally priced when they are released or consumed. The supplier, maker, or dealer of the taxable items will be required to pay the excise tax in the given circumstances.

What Are the Two Ways for Charging Excise Tax?

The two alternatives are advertising and charging specific excise taxes. Ad valorem uses a predetermined percentage on certain goods or assistance, whereas specific tariffs use predetermined monetary amounts on goods. On occasion, excise taxes—also referred to as sin taxes—are imposed on goods like cigarettes and alcohol that have high social costs. It's better to approach the services of expert tax advisors while dealing with the affairs of excise tax.

Ask Tax Experts

Companies involved in the importing or manufacturing of excise products in the UAE are advised to conduct a thorough assessment of their past and present records of Excise Tax statements as well as, if necessary, take appropriate steps to identify and correct their Excise Tax stances prior to the actual expiration of the period of five years, or else, companies would not be capable of making any more adjustments after the expiration period of five years. For further guidance and support in this matter, you should reach out to tax experts with your concerns. Our experts can give you the best piece of advice for any of your problems.

Read More : How to Get Tax Residency Certificate(TRC) in UAE

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.