Excise Tax Public Clarification - EXTP001

EXTP001

Excise Tax Public Clarification

Scenarios requiring the return of Digital Tax Stamps

Issue

The FTA has implemented a Digital Tax Stamp ("DTS") regime which requires the marking of certain excise goods with a physical and digital marker – also referred to as marks. The purpose of the mark is to validate authenticity of excise goods, as well as to track and trace the goods throughout the supply chain in order to verify whether tax has been paid on those goods.

Cabinet Decision No. 42 of 2018 on Marking Tobacco and Tobacco Products includes a number of scenarios where marks must be returned to the FTA. This public clarification provides further guidance on certain practical scenarios likely to be faced by manufacturers dealing with the application of marks to tobacco and tobacco products.

Summary

In certain cases, persons in possession of DTS marks will be required to return those marks to the FTA. In practice, this will be achieved by physically returning the marks to the appointed operator of the DTS scheme to manage on behalf of the FTA, which is currently De La Rue.

Where there is a requirement to physically return marks, the return should also be reported to the FTA via the DTS system.

Detailed analysis

When should marks be returned to the FTA?

Article 6(3) of Cabinet Decision No. 42 of 2018 sets out the following scenarios when marks should be returned to the FTA:

1. Where the person becomes aware that he no longer has the intention to use the marks for the purposes of affixing them to designated excise goods;

2. Where a period of 12 months has passed since the person received the marks and those marks have not been affixed to designated excise goods; and

3. Any other circumstances as specified by the FTA.

Change of intention with regards to the use of DTS marks

One of the scenarios in which marks must be returned includes when the person becomes aware that he no longer has the intention to use the marks for the purposes of affixing them to designated excise goods.

The FTA will interpret this provision broadly to mean any scenario in which the person knows they will no longer have the ability or intention to use the marks.

Such scenarios include, but are not limited to, the following:

Ceasing of business;
Ceasing of trade in a particular product line;
Wastage during the production process e.g. when the marks are damaged during the process of applying them to products;
Damage of marks outside the production process e.g. when marks are damaged as a result of water leakage, fire etc.

There are, however, within the above a number of scenarios were the FTA recognises it would be impractical to require the return of marks. Therefore, in such cases, the FTA will require sufficient evidence to prove the marks are no longer in the person's possession.

The scenarios where the FTA recognises it would be impractical to return marks include where marks are:

Damaged and destroyed; or
Stolen.

In such cases, the matter should nevertheless be reported to the FTA via the DTS system.

The process of returning marks

Where a person has an obligation to return marks, the FTA requires that those marks should be physically returned to the authorised operator of the DTS scheme on the FTA's behalf. At the time of publishing this Public Clarification, the authorised supplier is De La Rue. De La Rue will therefore receive returned marks on behalf of the FTA for onward management.

Any person required to return marks should contact De La Rue for further details on the specific procedure for returning those marks.

For the avoidance of doubt, fees originally paid for the purchase of marks will not be refunded where there is a requirement for marks to be returned. Businesses are therefore encouraged to ensure that they are as accurate as possible around the expected volume of marks required when placing orders.

Reporting requirements

As part of the process of returning marks where required, any person obligated to return marks should also report the return of the marks via the official DTS system at the point the obligation to return the marks arises. This requirement applies in all cases where a person is required to return marks i.e. both where a change of intention with respect to the use of the marks arises, or where 12 months has passed and the marks have not been affixed during that time.

Currently, the manner in which returned marks should be reported to the FTA is by emailing DTS-customercare@tax.gov.ae with details of the number of marks returned, the reason for the return, the manner in which marks were returned, the date of return and the date on which the obligation to return the marks arose.

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 and their Executive Regulations, and Cabinet Decision No. 42 of 2018 on Marking Tobacco and Tobacco Products.
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, i.e. 1 January 2019.