EXP005

Issue

In accordance with Article 15(3) of Cabinet Decision No. 37 of 2017 on the Executive Regulations of the Federal Decree-Law No. 7 on Excise Tax ("the Executive Regulations"), a warehouse-keeper must submit an application to the FTA in order to register each of the designated zones over which it is responsible. As part of this process, the FTA requires the warehouse-keeper to pay a registration fee in order to register the designated zone for a period of 12 months.

This means that every 12 months, warehouse- keepers must apply to renew the registration of their designated zones in order to maintain their status. If a designated zone does not have its registration renewed in accordance with FTA's procedures, it will cease to be considered a designated zone for Excise Tax purposes and Excise Tax will be immediately imposed on the excise goods held within.

Summary

Each Excise Tax warehouse-keeper must take the following actions:

Review the registration expiry dates of its designated zones;
Submit the designated zone renewal (amendment) form and pay the renewal fee separately for each designated zone requiring renewal;
Review the value and type of excise goods held in the designated zone so that the FTA may review the value of the current financial guarantee and instruct the warehouse-keeper to lodge an updated financial guarantee if required.

In the event that the above process is not followed and the designated zone registration is not renewed, all excise goods held within the designated zone on the date of the registration expiry will be considered to be released for consumption in the UAE. Excise Tax shall, therefore, become payable on those goods immediately.

Detailed discussion

Renewal form

In order to renew a designated zone's registration, in order for it to continue to maintain its 'designated zone' status for Excise Tax purposes, the warehouse keeper responsible for that designated zone must submit an amendment form for renewal purposes to the FTA.

The renewal form shall be available to be filed 30 days before the expiry date of the designated zone registration. The warehouse keeper will receive an e-mail notification of its requirement to renew the registration of the designated zone it is responsible for during this period.

It should be noted that the submission of a designated zone amendment form within the last 30 days before the expiry of the designated zone (for any reason) will be considered as the amendment form that is submitted for renewal purposes, and it will trigger the renewal process of the designated zone.

As part of the renewal process, the warehouse keeper will be required to provide the following details relating to the designated zone:

An estimate of the value of the annual throughput of excise goods entered into the designated zone (this is the total value of excise goods passing through the designated zone in a 12-month period); and
An estimate of the average value of excise goods held at month-end in the designated zone. This should be based on the average end of month stock value, calculated over a 12-month period to allow for seasonal variations.

Note that these details should be up-to-date, based on the immediately previous 12-month period. They should not simply replicate the details previously provided within the registration form if this information is no longer accurate.

Financial guarantee

The FTA will use these details to calculate the value of the financial guarantee which the warehouse keeper will be required to lodge over the designated zone.

Where the details within the renewal form suggests that the value of the financial guarantee should be either more or less than the value of the current financial guarantee, the FTA will notify the warehouse keeper of the need to arrange a new one. This will be a mandatory requirement where the FTA determines the financial guarantee should be more than the value of the current guarantee. Where the calculation indicates the value should be less than the current guarantee, the warehouse keeper will be given the option of whether to arrange for a lower guarantee to be lodged or to maintain the current value.

The new financial guarantee must be received by the FTA within 20 business days from the date requested.

Payment of renewal fees

The fee payable to renew a designated zone registration is AED 2,000.

The renewal form must be received by the FTA before the expiry date of the designated zone registration; while the renewal fee must be received by the FTA within 20 business days of the due date i.e. the expiry date of the current registration.

In the event that a warehouse keeper fails to pay the renewal fee within 20 working days of the due date of the registration, the designated zone will be treated as suspended for 20 business days, after which if no action is taken it will be treated as 'expired'.

For example, the due date of the renewal of a designated zone is 1 October. The following milestones shall apply in respect of the renewal:

The designated zone renewal form will be available for submission starting 1 September (i.e. 30 days before the renewal date);
The renewal fee must be paid within 20 business days from 1 October;
If the renewal form is not submitted by 1 October and/or the renewal fee has not been paid within 20 business days from 1 October, the designated zone will be treated as 'suspended'.

The designated zone will remain in this state for a further 20 business days from the date it moved into the 'suspended' state. During this time, the renewal process may be completed and the designated zone will be treated as renewed from the original renewal date i.e. 1 October;

If the process has not been completed before the expiry of the second period of 20 business days, the designated zone will be treated as expired. If the warehouse keeper intends to continue to operate the designated zone, they must submit a new registration application.

Expiry of designated zone registrations

In the event that a designated zone registration expires, all excise goods currently held within that designated zone will immediately be treated as released for consumption in the UAE. Excise Tax shall, therefore, become payable on those goods immediately.

The Excise Tax due shall be payable by declaring the Excise Tax due within the respective Excise Tax declaration (i.e. for the release of excise goods from a designated zone). The equivalent box on the Excise Tax return of the Taxable Person will then be populated accordingly.

This Public Clarification issued by the FTA is meant to clarify certain aspects related to the implementation of the Federal Law No 7 of 2017 on Tax Procedures, Federal Decree-Law No 7 of 2017 on Excise Tax and their Executive Regulations.
This Public Clarification states the position of the FTA and neither amends nor seeks to amend any provision of the aforementioned legislation. Therefore, it is effective as of the date of implementation of the relevant legislation, unless stated otherwise.

EXP005

Excise Tax Public Clarification

Renewal of Designated Zone Registrations

Issue

Summary

Detailed discussion