UAE (FTA) Federal Tax Authority issues a new public clarification, EXTP007, to shed light on the treatment of UAE excise tax on missing or deficient excise goods and the official process on how to destroy excise goods within UAE designated zones.
Key Points Under EXTP007 Public Clarification
Under this clarification for excise tax UAE, the following are the key points that are discussed:
- Relief from the FTA of any form won’t be given by the tax authority on the excise goods which are not able to sell within normal circumstances or typical course of a business provided such excisable goods have already been subject to UAE excise tax. In such case, the goods will be considered as ‘wastage.’
- Pursuant to Executive Regulation Article 12(3)(d), when excise goods are found deficient, lacking, or there’s a shortage in quantity from any UAE designated zone; or when they are being transferred between UAE designated zones, or when they are being held from a suspension arrangement as per the Customs Laws, they will be considered to have left excise tax designated zone(s) and will be cleared for free circulation.
An exception to Executive Regulation Article 12(3)(d) is available in the following situations:
1. The warehouse keeper who is responsible for the excisable goods notifies the Federal Tax Authority within thirty (30) days of detecting the deficit in the supply or shortage in quantity;
2. In the event that the tax authority acknowledges that the deficit or shortage of excisable goods is the result of a valid reason.
In the event that all of the aforementioned conditions are satisfied, the taxable person won’t be obliged to account for the deficient or missing excise goods.
Valid Reasons for Destruction of Excisable Goods
If the excisable goods need to be destroyed, the process of destruction must not be commenced until the competent authority, in this case the Federal Tax Authority, has issued its approval.
The valid causes or legitimate reasons accepted by the Federal Tax Authority are as follows:
Natural wastage or shortage
Common examples are unintentional contamination, spoiling, shortage and other similar occurrences. Supporting documentation that must be presented to the Federal Tax Authority include:
- Photographic evidence
- Details related to the manner of storage of excise goods (where inadequate storage has resulted in the natural wastage of the excisable goods)
- Inventory reports which indicate a natural shortage in quantity of excisable goods e.g. due to moisture loss
- Reports and other documentation indicating there was insufficient demand or insufficient time for selling the goods prior to their expiry
Shortage or wastage during the production
It’s for excise goods which have been lost during the manufacturing or production process up to FTA’s allowable threshold. Supporting documentation that must be supplied to the tax authority such as production reports indicating volume(s) of production, volume(s) produced from the production, and percentage of the product wasted.
Force Majeure
In such case, the excisable goods have already been destroyed from reasons that are beyond anyone’s control and no intervention can help either from the taxable person or warehouse keeper. The following supporting documentation will be necessary:
- Police report, Civil Defense and/or other types of rescue service reports related to the issue
- Photographic evidence of damage sustained by the excisable goods
- Insurance claims reporting the issue which has caused the damage to the excisable goods
If you want to know how to get excise tax relief in UAE for missing/deficient goods, you should know that the taxable person who has undergone excise tax registration UAE has to complete the form, EX203B or the Lost & Damaged Declaration, and have it approved by the warehouse keeper who is responsible for the relevant Designated Zone. The declaration must then be submitted to UAE Federal Tax Authority within thirty (30) days of discovery of shortage or deficiency along with the supporting documents.
Supporting documents can be submitted via email at deficiencyandshortage@tax.gov.ae. If the destruction of excisable goods is necessary, the declaration submitted to the Federal Tax Authority with the help of excise tax experts in UAE must include approval of a competent authority e.g. the Municipality or the Customs Authority. Permission must be obtained from the competent authority for the destruction process of excisable goods. Approval must also specify how the destruction process will be carried out.
Granting of partial or full excise tax relief in UAE will be at the discretion of the Federal Tax Authority UAE. If you want more information on how to get partial or full excise tax relief in UAE, consult with reputable tax specialists. The UAE tax authority may notify a warehouse keeper of the agency’s intent to inspect the relevant excisable goods, allow the disposal or destruction of the goods without further inspection, or reject the request entirely. A taxable person or Registrant is required in providing a Destruction Certificate issued by a party that’s responsible for the approved process of destruction.
For further information on the EXTP007 Public Clarification and for support in regulatory compliance, reach out to the Dubai excise tax specialists of Farahat & Co today!