UAE’s tax authority to start penalising violators of tobacco scheme

The UAE’s Federal Tax Authority (FTA) will begin penalising the violators of its new tobacco digital tax scheme, it announced on Saturday.

The penalties are meant to curb attempts at commercial fraud, and protect consumers from contraband, low-quality products, that do not conform with standards and harm their health and the environment, the FTA said in a statement.

The digital tax scheme, which went into effect on January 1, 2019, allows for electronically tracking cigarette packs from production and until they reach the end consumers, to ensure full compliance with excise tax obligations.

The UAE imposed a 100 per cent excise tax on tobacco products from October 2017.

As of May 1, 2019, the import of any type of cigarettes into the UAE not bearing the digital tax stamps has been prohibited. Meanwhile, the sale across UAE markets, or importation or production of all types of cigarettes not bearing the marks will be prohibited as of August 2019.

Read: Importing cigarettes without ‘digital tax stamp’ now prohibited in the UAE

The FTA said mechanisms have been set to implement the new legislation, and penalties have been set for nine types of violations.

* A person who possesses or handles designated excise goods that do not carry a digital tax stamp incurs a penalty of Dhs50,000 and 50 per cent of the excise tax due on those goods.

* If a person knowingly allows his premises to be used for the sale of unmarked goods in the UAE, that person shall incur a penalty of Dhs25,000 for the first violation and Dhs50,000 in case of repetition.

* If a person alters or prints over digital tax stamps affixed to the goods, they would be subject to a penalty of Dhs50,000 and 50 per cent of the excise tax due.

* Meanwhile, if a person fails to report the movement of excise goods, they will incur a penalty of Dhs20,000 for each time the violation was committed.

* In the event where a person fails to comply with the requirements to securely store the digital tax stamp as determined by the FTA, a fine of Dhs50,000 per incident would be applicable.

* In case a person fails to comply with time limits for returning unused digital tax stamps to the FTA, the penalty is Dhs50,000 per incident.

* Failure to affix digital tax stamps in the manner and location specified by the FTA will draw a fine of Dhs25,000 for the first violation and Dhs50,000 in case of repetition.

* A person who conducts unauthorised trading, swapping, selling, or otherwise supplying of digital tax stamp will incur fines of Dhs25,000 for the first violation and Dhs50,000 in case of repetition, in addition to 50 per cent of the amount collected as tax.

* If a person re-uses digital tax stamps that had previously been used, they would be subject to a penalty of Dhs50,000 and 50 per cent of the tax due.

The FTA asserted that the scheme will be gradually expanded to cover all tobacco products.

Read: UAE’s new excise tax tobacco scheme to apply to shisha from Q4