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Significant Amendments to UAE’s Excise Tax Executive Regulations

Brief Overview of the Amendments

On November 6, 2023, the United Arab Emirates (UAE) Cabinet of Ministers introduced an amendment to the Excise Tax through Cabinet Decision No. 108 of 2023. These amendments effective from December 1, 2023, mark the first major update to the Excise Tax Executive Regulations since their inception in October 2017. The changes are in response to challenges faced by the business community impacted by Excise Tax, addressing concerns and introducing new provisions to enhance clarity and compliance.

These amendments play a significant role in the UAE market and the Excise Tax framework, addressing both the formalization of existing trends and relief for compliance challenges faced by businesses, below are the certain challenges faced by the business:

1. Refunds in case of local excise goods purchased and then exported:

  • Non-Excise Tax registered exporters dealing with locally purchased Excise Goods can now seek refunds, opening opportunities that were previously unavailable.
  • The refund process falls under the category of tax refunds in special cases, allowing businesses to recover Excise Tax through a specific refund process 

2. Natural Shortage Concept:

  • The introduction of the “natural shortage” concept eliminates the release for consumption of Excise Goods not declared. While reporting requirements still apply, this change streamlines compliance.

3. Non-Maintenance of Stockpile Report:

  • The challenges encountered by registrants in maintaining stockpile reports, as mandated by the Excise Law, have now been addressed and clarified through recent amendments.


Key Amendments in Excise Tax

1. New Definitions:

  • Article 1 of the Amended Executive Regulation introduces additional definitions such as “official evidence,” “commercial evidence,” and “shipping certificate,” bringing clarity and specificity to key concepts.

2. Deregistration Authority:

  • The Federal Tax Authority (FTA) now has the power to forcefully deregister an Excise Taxable Person if they cease relevant activities for six months unless there is proof of intention to resume within the next six months as per provisions (2) and (5) of Article 6 of the Amended Executive Regulation

3. Audited Reports and Stockpiled Goods:

  • Failure to maintain audited reports for stockpiled Excise Goods may lead to the FTA considering the entire inventory as “excess,” triggering a full Excise Tax liability as per Article 11 (5) of the Amended Executive Regulation.

4. Exemption for Natural Shortages:

  • Excise registrants were facing natural shortages and are no longer considered ‘released for consumption,’ benefiting producers in designated zones, especially those dealing with tobacco products as per Article 12 (5) (b) of the Amended Executive Regulation.

5. Detailed Export Exemption Requirements:

  • As per Article 14 of the Amended Executive Regulation, outlines detailed documentation requirements for exempting the export of Excise Goods from Excise Tax, reflecting the FTA’s focus on export transactions and the need for thorough evidence.

6. Excise Tax Designated Zones Compliance:

  • As per Article 15 of the Amended Executive Regulation, non-compliance with conditions and requirements will now subject Excise Tax Designated Zones to be treated as mainland UAE for Excise Tax purposes.

7. Deductible Excise Tax for Exported Goods:

  • As per Article 16 of the Amended Executive Regulation establishes evidentiary requirements for Deductible Excise Tax on exported goods, aligning with the documentation needed for exempting exported goods.

8. Refund for Non-Taxable Persons:

  • Article 22 allows persons not classified as taxable for Excise Tax purposes to seek a refund for Excise Tax paid on goods exported outside the UAE, effective from June 1, 2024.


Actions to be taken by businesses

Impacted businesses need to review their operations and compliance strategies in light of these changes to ensure a smooth transition and adherence to the updated regulations.

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