Navigating Excise Tax Compliance: Dos and Don'ts Under UAE Tax Laws

Introduction:

Excise tax compliance is a crucial aspect of doing business in the United Arab Emirates (UAE). Understanding and adhering to the excise tax regulations is essential to avoid penalties and fines imposed by the Federal Tax Authority (FTA). This article aims to provide an overview of the dos and don'ts of excise tax compliance under UAE tax laws, along with the potential consequences of non-compliance.

Dos for Excise Tax Compliance:

• Register for Excise Tax: Any business involved in the production, import, or sale of excise goods must register with the FTA for excise tax purposes. Timely registration ensures compliance with the law.
• Accurate Calculation and Reporting: Maintain accurate records of excise goods, including quantities, values, and relevant transactions. Calculate and report excise tax liabilities correctly to avoid discrepancies or underpayment.
• ?Timely Filing of Excise Tax Returns: Submit excise tax returns to the FTA within the specified timeframes. Late filing may result in penalties and interest charges.
• ?Retain Documentation: Keep all necessary records and documentation related to excise goods, including invoices, import/export documents, and inventory records. These documents will be required for audits and compliance verification.
• ?Educate Employees: Train your staff on excise tax laws and compliance requirements. Ensure they understand their roles and responsibilities in maintaining compliance with excise tax regulations.

Don'ts for Excise Tax Compliance:

• ?Avoid Misclassification: Do not misclassify or misrepresent excise goods to manipulate tax obligations. Incorrect classification may lead to penalties and reputational damage.
• Non-disclosure of Information: Do not conceal or fail to disclose relevant information regarding excise goods, transactions, or any other details required by the FTA. Transparency and full disclosure are essential.
• Non-payment of Excise Tax: Deliberate non-payment or underpayment of excise tax is a serious violation. Ensure all tax liabilities are paid in full and on time to avoid penalties and legal consequences.
• Failure to Comply with Filing Deadlines: Ignoring or missing the deadlines for filing excise tax returns can result in penalties and interest charges. Be aware of the deadlines and submit returns within the specified timeframe.

The UAE has implemented several excise tax laws to regulate the taxation of specific goods. Here are the key excise tax laws in the UAE:

• Federal Law No. 1 of 1972 on the Competencies of the Ministries and Powers of the Ministers, and its amendments;
• Federal Law No. 11 of 1981 on the Imposition of a Federal Customs Tax on Imports of Tobacco and its Derivatives, and its amendments;
• Federal Law No. 26 of 1981 on the Commercial Maritime Law, and its amendments;
• Federal Law No. 5 of 1985 promulgating the Civil Transactions Law, and its amendments;
• Federal Law No. 3 of 1987 promulgating the Penal Law, and its amendments;
• Federal Law No. 10 of 1992 promulgating the Law of Evidence in Civil and Commercial Transactions, and its amendments;
• Federal Law No. 11 of 1992 promulgating the Civil Procedure Law, and its amendments;
• Federal Law No. 18 of 1993 promulgating the Commercial Transactions Law;
• Federal Law No. 8 of 2004 on the Financial Free Zones;
• Federal Law No. 1 of 2006 on Electronic Commerce and Transactions;
• Federal Law No. 2 of 2008 on the National Societies and Associations of Public Welfare;
• Federal Law No. 15 of 2009 on Combating Tobacco, and its amendments;
• Federal Law No. 1 of 2011 on the State’s Public Revenues;
• Federal Law No. 8 of 2011 on the Reorganization of the State Audit Institution;
• Federal Decree-Law No. 8 of 2011 on the Rules of the Preparation of the General Budget and Final Accounts;
• Federal Law No. 4 of 2012 on the Regulation of Competition;
• Federal Law No. 12 of 2014 on the Organization of the Auditing Profession; 2
• Federal Decree-Law No. 7 of 2017 and its amendments – Unofficial translation
• Federal Law No. 2 of 2015 on Commercial Companies;
• Federal Decree-Law No. 13 of 2016 on the Establishment of the Federal Tax Authority, and its amendments;
• Federal Law No. 7 of 2017 on Tax Procedures, and its amendments; and Pursuant to what was presented by the Minister of Finance and approved by Cabinet,

It is important to consult the specific provisions and amendments of each law to ensure accurate compliance with UAE excise tax regulations.

Penalties for failure to comply with UAE excise tax laws vary depending on the specific violation. Here are the potential penalties associated with non-compliance.

On Violations and Administrative Penalties related to the Implementation of Federal Decree-Law No. 7 of 2017 on Excise Tax: Examples

1. A retail store in the UAE failed to display prices inclusive of tax on their products, violating the requirement set by the Federal Tax Authority : Potential penalties associated with non-compliance in AED 5,000
2. A company in the UAE violated the excise tax laws by failing to comply with the conditions and procedures for transferring excise goods from one designated zone to another. They also neglected to follow the proper mechanisms for preserving, storing, and processing the excise goods, leading to non-compliance with the regulations set by the authorities : The penalty shall be the higher of 50,000 or 50% of the Tax, if applicable, chargeable on the goods in relation to the violation
3. A taxable person operating in the UAE failed to provide the tax authority with the required price lists of the excise goods they produce, import, or sell. This failure to comply with the regulations resulted in a violation of the excise tax laws, as it hindered the authority's ability to monitor and verify the correct taxation of these goods. The taxable person may face penalties and fines for this non-compliance: 5,000 for the first time and 10,000 in case of repetition.

Conclusion:

Compliance with excise tax laws is essential for businesses operating in the UAE. By following the dos and avoiding the don'ts outlined in this article, businesses can ensure adherence to excise tax regulations and minimize the risk of penalties and fines. It is recommended to seek professional advice and stay updated with the latest developments in UAE tax laws to maintain excise tax compliance effectively.

Navigating Excise Tax Compliance in UAE: Learn the Dos and Don'ts to avoid penalties. Stay updated with the latest regulations! ????

Compliance with excise tax laws is essential for businesses operating in the UAE. By following the dos and avoiding the don'ts outlined in this article, businesses can ensure adherence to excise tax regulations and minimize the risk of penalties and fines. It is recommended to seek professional advice and stay updated with the latest developments in UAE tax laws to maintain excise tax compliance effectively.

?? Learn how excise tax complaince can help your company succeed in the UAE market. Contact us right away to schedule a consultation! send us an email on ? [email protected] or call on ?? +971523205619 to know more.

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