UAE set to introduce digital tax stamp scheme for tobacco products in 2019

Looking ahead, the forthcoming tax period will see the implementation of several new regulatory mechanisms and systems.

The UAE is also set to introduce a new digital tax stamp scheme for tobacco products, which will come into effect at the beginning of 2019, the Federal Tax Authority (FTA) has confirmed.

The scheme follows the implementation of a 100 per cent excise tax on tobacco products in October 2017.

It will establish a “comprehensive tracking framework” to support the FTA’s efforts in collecting taxes, combating tax evasion, and upholding the rights and duties of taxable persons in the UAE, a statement said.

The scheme will work by means of a stamp or digital seal that will be installed on tobacco product packaging, which will be registered in the authority’s database and read by special devices to ensure that the tax on the products is paid.

It will deter tax evasion, facilitate inspections at customs points and in markets, and prevent the selling of non-taxed tobacco products, said Khalid Ali Al Bustani, director general of the FTA.

He noted that the cabinet decision on marking tobacco and tobacco products aims to strengthen the UAE’s tax system and that the UAE is the first country in the region to apply a digital tracking system for tobacco-labelling.

He also stressed that tobacco companies must comply with the new scheme to avoid penalties and being banned from practicing their business.

Read: UAE President issues federal excise tax law for tobacco, soft drinks

According to the FTA, 97.7 per cent of companies registered for excise tax were complaint with the requirements in the first year of the tax’s introduction.

Excise tax in the UAE came into effect on October 1, 2017, with a 50 per cent tax applied to soft drinks and 100 per cent tax applied to tobacco products and energy drinks.

The FTA collected the 12th installment of the tax (covering September 2018), the deadline for which was set for October 15.

So far, the total number of registrants has reached 715, the statement said.

Al Bustani attributed the high rate of compliance to the ease of the procedures – returns can be submitted and due taxes settled on a 24-hour basis from any location through the FTA official website.

The portal also provides flexible payment mechanisms and detailed information and guidance on the process.

The FTA has also launched 60 guides, three e-learning programmes and 22 infographics covering various aspects of taxation including more than 12 guides on excise tax, such as the disclosure of imports, the authorisation and registration of imports, recovering excise tax, submitting tax returns, settling due taxes, and information regarding warehouse keepers, designated zones, and other related topics.

“The FTA organises seminars and workshops for businesses around the UAE to answer their queries in this regard, in addition to arranging joint inspection campaigns with the Departments of Economic Development and Municipalities, to alert non-complying businesses to remedy their situation,” said Al Bustani.

“The positive outcomes clearly indicate that we have begun achieving the main objectives of introducing excise tax, most notable of which is building a safe and healthy society by reducing the consumption of goods that harm the health of community members and affect the quality of the environment,” he added.

Statistics indicate that the value of the country’s foreign trade of tobacco and its products decreased significantly over the course of this year, he said, without revealing figures.

“The tax system has also helped increase financial resources to support the expansion of government services provided to the public,” said Al Bustani.