UAE rolls out digital tax system for tobacco products

The Federal Tax Authority (FTA) asserted that Cabinet Decision No. (42) of 2018 On Marking Tobacco and Tobacco Products establishes an accurate and effective control system allowing the Authority to efficiently collect taxes, ensure transparency and combat tax evasion.

The Scheme is set to be implemented in collaboration with the relevant authorities to ensure a single integrated set of procedures is rolled out, guaranteeing the protection of rights and responsibilities of Taxable Persons, as well as ensuring transparency with regards to the procedures that regulate their relationship with the Authority.

The Authority reaffirmed that tobacco suppliers must abide by the new Scheme to avoid the administrative penalties, which could include a ban on non-compliant businesses, preventing them from exercising any commercial activity until they comply fully with the system, which goes into effect at the beginning of 2019.

The FTA revealed that another Decision is expected to be issued by the Cabinet detailing the administrative penalties imposed on violations of the procedures, including fines imposed on a Person who possesses Excise goods that do not carry digital stamps, or who permits the use of his/her facilities to sell such products.

The Federal Tax Authority asserted that penalties will also be imposed on Persons who tamper with the stamps placed on these goods, or Persons who print on top of them. Furthermore, penalties will be imposed on Persons who fail to declare the transfer of Excise goods, as well as on Persons who fail to comply with the safe-storage requirements for the stamps; Persons who undertake unauthorised trading, exchange, sale or supply of stamps; and Persons who re-use previously used stamps.

FTA Director General Khalid Ali Al Bustani said, “Cabinet Decision No. (42) of 2018 On Marking Tobacco and Tobacco Products  complements the UAE’s tax legislation infrastructure, which is one of the most advanced in the world. It was developed following extensive studies and offers simple procedures to help businesses comply with tax obligations.”

“The UAE is the first country in the region to implement a Digital Tax Stamp Scheme for tobacco products – the most advanced of its kind in the world,” Al Bustani added. “The system offers an innovative solution for combatting tax evasion and facilitating inspection and control at customs and markets; it prevents the sale of tobacco products where Excise Tax has not been settled. Digital tax stamps are placed on the packaging of tobacco products and registered in the FTA’s database; they contain tax-related data that can be read using special devices.”

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