EXTP002

Issue

The FTA has implemented a Digital Tax Stamp ("DTS") regime which requires the marking of certain Designated Excise Goods with a physical and digital marker – also referred to as 'marks'. The purpose of the mark is to validate authenticity of Designated 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.

Article 1(4) of Federal Tax Authority Decision No. 3 of 2018 on Implementing the Marking Tobacco and Tobacco Products Scheme indicates that for all types of cigarettes the date from which it is not permissible to supply any such products which do not have marks in the UAE shall be 1 August 2019.

The DTS scheme has been introduced with end-to-end traceability, also known as full aggregation. All marks on relevant products entering the UAE market were required to contain end-to-end traceability by 1 August 2019. An agreed workaround solution ("workaround") was also allowed as a short-term process to accommodate for the scenarios and entities where the end-to-end traceability was not yet ready to be in place, in the period until August 2019. Therefore, prior to 1 August 2019, Designated Excise Goods could enter the UAE market with a valid mark, which did not contain end-to-end traceability.

This public clarification provides further guidance on where DTS marked products have been imported into Designated Zones with customs control in the period until 1 August 2019 under the workaround solution and whether such products can be transferred to the UAE mainland or Duty Free areas after 1 August 2019.

Summary

Designated Excise Goods which have been marked with a Digital Tax Stamp under the workaround solution (i.e. not including end-to-end traceability) and have been legitimately imported into the UAE, may remain in the UAE market beyond 1 August 2019. Similarly, any such products which have been entered into an Excise Tax Designated Zone (with a customs check) in the period 1 May 2019 until 1 August 2019, are allowed to be moved into the UAE mainland or Duty Free areas after 1 August 2019 and will still be considered compliant with the DTS regime.

In all cases, all filing and reporting obligations regarding such products will still apply in these scenarios and should be fully compliant with the provisions of issued legislation.

Detailed discussion

Are Designated Excise Goods that were imported into Designated Zones with customs control prior to 1 August 2019, with DTS marks including the workaround solution, allowed to be moved into UAE mainland or Duty Free areas post 1 August 2019?

The DTS scheme has introduced end-to-end traceability, also known as full aggregation, which is a feature of the DTS scheme at the manufacturer level and allows all cigarettes and their 'aggregated' packs to be tracked through the supply chain in order to ensure their authenticity and full end-to-end traceability.

In order to accommodate manufacturers' time to prepare their current stocks to meet the technical requirements for full aggregation, an interim period was granted between 1 May 2019 - 1 August 2019 where Designated Excise Goods were allowed to enter the UAE bearing a mark which met the DTS requirements except for the end-to-end traceability function. This is known as the 'workaround solution'.

DTS marks not containing full aggregation have been approved for use within the UAE as a short-term measure. Use of such approved DTS marks complies with the excise tax legislation requiring cigarettes to be marked from 1 August 2019.

As a result, cigarettes which have been marked with a DTS mark under the workaround solution (i.e. not including end-to-end traceability) and which have been legitimately imported into the UAE in the period 1 May 2019 until 1 August 2019, may remain in the UAE market beyond 1 August 2019.

Similarly, cigarettes which have been marked with a DTS mark under the workaround solution and which have entered / imported into an Excise Tax Designated Zone (with customs control) in the period 1 May 2019 until 1 August 2019, may be moved into the UAE mainland or Duty Free areas after 1 August 2019. Such products will be considered compliant with the requirements of the DTS regime.

It should be noted that all filing and reporting obligations regarding such products will still apply in these scenarios and Taxable Persons should ensure they are fully compliant with the provisions of issued legislation.

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, unless stated otherwise.

EXTP002

Excise Tax Public Clarification

Moving Excise Goods which are Marked with a Digital Tax Stamp Not Containing End-to-End Traceability

Issue

Summary

Detailed discussion