EXTP009

Issue

Excise Tax in the UAE is regulated by the Federal Decree-Law No. 7 of 2017 on Excise Tax ("Excise Tax Decree-Law"). The Federal Decree-Law No. 19 of 2022 on the Amendment of Some Provisions of the Federal Decree-Law No. 7 of 2017 on Excise Tax has been issued, amends some articles of the Excise Tax Decree-Law, and is effective from 14 October 2022.

The following articles of the Excise Tax Decree-Law have been amended:

Article 1 on Definitions, including the insertion of new definitions.
Article 5
Article 6 whereby this article is further clarified in this Public Clarification.
Article 19 whereby this article is further clarified in this Public Clarification.
Article 20
Article 22
Article 23
Article 28

A new Article 25 bis has been inserted in the Excise Tax Decree-Law on Statute of Limitation. This article is further clarified in this Public Clarification.

This Public Clarification is specifically intended to inform persons of the following main changes to the Excise Tax Decree-Law:

Exceptions from registration
Payment of amount received as Excise Tax
The statute of limitation

Summary

The following amendments to the Excise Tax Decree-Law are effective from 14 October 2022.

Exception from registration:

Persons importing excise goods for purposes other than conducting business will be excepted from registration.^[1]

Payment of any amount received as Excise Tax:

Any amount(s) collected, or reflected on an invoice as Excise Tax, is deemed to be Excise Tax and payable to the FTA.^[2]

The statute of limitation:

A statute of limitation relating to tax audits and tax assessments has been introduced in the amended Excise Tax Decree-Law.

Detailed analysis

Exception from registration:

As a general rule, a person is not allowed to import excise goods^[3] or release excise goods from a designated zone^[4] unless the person is registered for Excise Tax purposes.^[5]

However, as an exception to the general rule, the FTA may except a person from tax registration if it appears to the FTA that the person will not regularly import excise goods.^[6]

Anyone excepted from tax registration is required to inform the FTA of any changes to that person's circumstances that would make the person liable to register for Excise Tax.^[7]

Furthermore, a person importing excise goods for purposes other than conducting business, shall be excepted from tax registration. The person shall, however, remain liable to pay the relevant Excise Tax on the import.^[8]

Qualifying for an exception from registration merely releases the person from the administrative action of registering and not from the liability to pay Excise Tax or administrative penalties which may be applicable. ^[9]

Payment of amount received as Excise Tax:

According to the amendment, any person receiving an amount as Excise Tax or issuing an invoice reflecting Excise Tax, must report and settle such amount with the FTA, as it is deemed to be Excise Tax. ^[10]

This may, for example, include instances where a person collected Excise Tax in respect of goods which are not excise goods.

Statute of limitation:

A Statute of Limitation article has been introduced to the Excise Tax Decree-Law, that sets the maximum timeframe in which the Authority can act. Once this period expires, the FTA is generally precluded from taking actions such as commencing an audit or issuing a tax assessment.

Generally, the FTA may not conduct a tax audit or issue a tax assessment to a taxable person after the expiration of 5 years from the end of the relevant tax period. ^[11]

As an exception to the general rule, the FTA may conduct a tax audit or issue a tax assessment to the taxable person after 5 years from the end of the relevant tax period in the following instances:

If the FTA notified the taxable person of the tax audit before the expiry of the 5-year period, provided that the tax audit is completed, or the tax assessment is issued, within 4 years from the date of the notification of the tax audit. ^[12]
If the tax audit or tax assessment issuance relates to a voluntary disclosure submitted in the fifth year from the end of the relevant tax period, provided that the tax audit is completed or the tax assessment is issued, within one year from the date of submission of the voluntary disclosure. ^[13] No voluntary disclosure may be submitted after five years from the end of the relevant tax period. ^[14]
In the case of tax evasion, the FTA may conduct a tax audit or issue a tax assessment within 15 years from the end of the tax period in which the tax evasion occurred. ^[15]
If a taxable person failed to register for Excise Tax within the prescribed period ^[16], the FTA may conduct a tax audit or issue a tax assessment within 15 years from the date on which the taxable person should have registered for Excise Tax. ^[17]

The Cabinet may, according to a suggestion by the Minister, amend the statute of limitation in respect of instances where a taxable person was notified of an audit before the expiry of the 5-year period, or where a taxable person submitted a voluntary disclosure in the fifth year following the relevant tax period. In such instance, a Decision will be issued to amend the period specified for the completion of the Tax Audit or the issuance of the Tax Assessment as per clauses 2 or 3 of Article 25 bis. ^[18]

In all cases, the statute of limitation will be interrupted where any of the reasons as stipulated in Federal Law No. 5 of 1985, promulgating the Civil Transactions Law and its amendments, occur. ^[19]

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 and its amendments, Federal Decree-Law No. 7 of 2017 on Excise Tax and its amendments, 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.

Legislative References:

In this clarification, Federal Decree-Law No. 7 of 2017 on Excise Tax and its amendments is referred to as 'Excise Tax Decree-Law'.

^[1]Article 6(3) of the Excise Tax Decree-Law states that the person who imports for purposes other than conducting business shall be excepted from tax registration, without prejudice to the obligation to pay the due tax on that import.

^[2]Article 19(3) of the Excise Tax Decree-Law states that any person that receives an amount as tax or issues an invoice in relation to Tax, must settle it to the Authority, and it shall be treated with the same treatment determined for due tax as per the provisions of this Decree-Law.

^[3]Article 2(2)(b) of the Excise Tax Decree-Law states that tax shall be imposed on the import of excise goods.

^[4]Article 2(2)(c) of the Excise Tax Decree-Law states that tax shall be imposed on the release of excise goods from a designated zone.

^[5]Article 5(1) of the Excise Tax Decree-Law states that a person shall be prohibited from conducting any activity of the activities listed within Clause 2 of Article 2 of this Decree-Law before registration thereof for tax purposes, in accordance with the provisions of this Decree-Law.

^[6]Article 6(1) of the Excise Tax Decree-Law states that, as an exception from the provisions of Clause 1 of Article 5 of this Decree-Law, the Authority may except any person from tax registration, if the tax is due under paragraphs (b) and (c) of clause 2 of Article 2 of this Decree-Law, if it appears to the Authority that he will not regularly import excise goods, pursuant to what is specified in the Executive Regulation of this Decree-Law.

^[7]Article 6(2) of the Excise Tax Decree-Law states that anyone excepted from tax registration according to clause 1 of this Article shall inform the Authority of any changes to him that would make him subject to tax under the provisions of this Decree-Law, within the timeframes and in accordance with the procedures stated in the Executive Regulation of this Decree-Law.

^[8]Article 6(3) of the Excise Tax Decree-Law states that the person who imports for purposes other than conducting business shall be excepted from tax registration, without prejudice to the obligation to pay the due tax on that import.

^[9]Article 6(4) of the Excise Tax Decree-Law states that exception of a person from registration under the provisions of this Article does not impair his obligation to settle any due tax or administrative penalty in accordance with the provisions of this Decree-Law or any other law.

^[10]Article 19(3) of the Excise Tax Decree-Law states that any person that receives an amount as tax or issues an invoice in relation to Tax, must settle it to the Authority, and it shall be treated with the same treatment determined for Due Tax as per the provisions of this Decree-Law.

^[11]Article 25 bis (1) of the Excise Tax Decree-Law states that, except in cases under clauses 2, 3, 6, 7 of this Article, the Authority may not conduct a tax audit or issue a tax assessment to the taxable person after the expiration of 5 years from the end of the relevant tax period.

^[12]Article 25 bis (2) of the Excise Tax Decree-Law states that the Authority may conduct a tax audit or issue a tax assessment to the taxable person after 5 years from the end of the relevant tax period, if he has been notified of the commencement of such tax audit's procedures before the expiration of the 5-year period, provided that the tax audit is completed or the tax assessment is issued, as the case may be, within 4 years from the date of notification of the tax audit.

^[13]Article 25 bis (3) of the Excise Tax Decree-Law states that the Authority may conduct a tax audit or issue a tax assessment after the expiration of 5 years from the end of the relevant tax period if such tax audit or tax assessment issuance relates to a voluntary disclosure submitted in the fifth year from the end of the tax period, provided that the tax audit is completed or the tax assessment is issued, as the case may be, within one year from the date of submission of the voluntary disclosure.

^[14]Article 25 bis (5) of the Excise Tax Decree-Law states that no voluntary disclosure may be submitted after the expiration of five years from the end of the relevant tax period.

^[15]Article 25 bis (6) of the Excise Tax Decree-Law states that, in the case of tax evasion, the Authority may conduct a tax audit or issue a tax assessment within 15 years from the end of the tax period in which the tax evasion occurred.

^[16]Article 5(2) of the Excise Tax Decree-Law states that, without prejudice to the provisions of clause 1 of this Article, the person liable for the due tax according to Article 4 of this Decree-Law shall apply to the Authority for tax registration in accordance with the provisions of the Tax Procedures Law, within 30 days of the end of any month during which the person carries out or intends to carry out activities mentioned in Clause 2 of Article 2 of this Decree-Law, or from the effective date of this Decree-Law, whichever is later.

^[17]Article 25 bis (7) of the Excise Tax Decree-Law states that, in case of tax registration failure, the Authority may conduct a tax audit or issue a tax assessment within 15 years from the date on which the taxable person should have registered for tax.

^[18]Article 25 bis (4) of the Excise Tax Decree-Law states that the Cabinet may, according to a suggestion by the Minister, issue a Decision to amend the period specified for the completion of the tax audit or the issuance of the tax assessment as per Clauses 2 or 3 of this Article.

^[19]Article 25 bis (8) of the Excise Tax Decree-Law states that the statute of limitation set forth in this Article shall be interrupted for any of the reasons provided for in the Federal Law No. 5 of 1985, promulgating the Civil Transactions Law, or any other Federal law replacing it.

EXTP009

Excise Tax Public Clarification

Amendment of the Excise Tax Decree-Law - Federal Decree-Law No. 19 of 2022

Issue

Summary

Detailed analysis

Legislative References: