To collect taxes and combat tax avoidance, the Federal Tax Authority (FTA) is ready to launch a tax control system in UAE for tobacco products as per the Decision No. (42) of 2018. To roll out the single integrated set, the scheme is ready to be implemented in alliance with the applicable authority, which guarantees the protection of rights and responsibilities of a taxable person and also to ensure the procedures that will balance their relationship with the authority.
The Federal Tax Authority (FTA) told that penalties will be imposed on:
- Tobacco suppliers must obey the new scheme to avoid the administrative penalties which will be into effect at the starting of 2019, which also includes a ban on disobedient businesses and they cannot do any commercial activity until they obey the system fully.
- Violation of the procedures which include the fines imposed on a person who own tax goods that does not carry any digital stamp, or who allows the use of their facilities to sell the products.
- The person who prints on these goods, or interfere with the stamps placed on them.
- Those who fails to declare the transfer of tax goods
- The person who fails to obey the safe-storage requirements for the stamps.
- The person who accepts unofficial trading, exchange, sale or supply of stamps
- The person who reused the previously used stamp.
Why a Digital Tax Stamp?
FTA Director General His Excellency 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.”
FTA explained that the Cabinet decision defined the procedure to be followed to apply the stamps on tobacco products and specify that the required tax has indeed been paid. On specific products and exact position determined by the authority, the stamp must be applied which was also authorised to determine cases where stamps are not required. Stamps must be placed onto tax goods (after packaging) at the facility where they are produced (if manufactured in the UAE), or importing them to foreign countries, the decision specified.
Placement and Supply of Stamp
The shape of the stamp can be determined by the authority, as per the cabinet decision and the condition for applying it, which includes determining the cases where no stamps is required, the method of placing the stamp and its location on the tax good in question.
To purchase the stamp, the decision need the importer or local producer to issue an order according to procedures surrounding the supply of the stamp which is predefined by the authority; which indicates that the accepted supplier must supply the stamps to the importer or local producer, according with the procedures agreed between the approved supplier and the FTA. These stamps cannot be traded, exchanged, sold or supplied by any other individual; To supply the stamps directly to the particular producer of tax goods, which may also include foreign producers, requested by the importers across the UAE about approved supplier.
Due taxes are set on the stamp by FTA, which must be paid by the supplier before stamps are issued.
The decision of the Cabinet specified the procedure for identifying and tracking the origin of specific tax goods (tobacco and tobacco products), which indicates that local producers/importers/persons who are designated in the supply chain have to keep the records of the transfer of all the tax goods ro and within the UAE during the period in which they are in control of these goods. This includes (but is not limited to) entry of said tax goods into the control of the local producer/importer/ Person designated in the supply chain, as well as the measured transfer of these goods within the UAE, until they exit the control of said local producer/ importer/person designated in the supply chain.
Any person who is dealing with the questions of tax goods and who is required by the FTA to document the movement of these goods is known as the “designated person.”
All local producers/importers/Persons designated in the supply chain must register and declare the tax goods they sell, store, transfer, buy, or process. Meanwhile, customs agencies are tasked with verifying stamps on tax goods entering the UAE.