Federal Tax Authority Gears Up to Implement Phase 2 of the ‘Marking Tobacco and Tobacco Products Scheme’ in November

  • The Authority held the second awareness workshop for producers and importers of waterpipe tobacco and electrically heated cigarettes.

The Federal Tax Authority (FTA) is ramping up its efforts in preparation to implement the second phase of the ‘Marking Tobacco and Tobacco Products Scheme’, where it will be expanded to cover waterpipe tobacco (known in Arabic as ‘Mu’assel’) and electrically heated cigarettes as of November 1, 2019.

‘Digital Tax Stamps’ will be made available for purchase by producers and importers of waterpipe tobacco and electrically heated cigarettes, the Authority revealed, as it held its second awareness workshop in Dubai to introduce them to the Scheme’s procedures and objectives, as well as the timeline for the second phase. The workshop was led by FTA experts and representatives from De La Rue, the company commissioned by the Authority to operate the system.

The Federal Tax Authority asserted that the Scheme was launched to support its efforts to collect taxes, combat tax evasion, and protect consumers from commercial fraud. The FTA went on to note that these preparations follow the successful implementation of the Scheme’s first phase, where the sale and possession of any cigarette packets not bearing the ‘Digital Tax Stamps’ was prohibited across local markets as of Thursday, August 1, 2019.

In a press statement issued today, FTA Director General Khalid Ali Al Bustani said: “This workshop is part of the Authority’s plan to raise tax awareness among taxable businesses, maintain constant communication with professionals working across all economic activities, and keep them in the loop with regards to the latest developments in tax procedures. These workshops allow us to listen to their opinions and suggestions, and address any obstacles they may be facing to ensure a smooth implementation of tax laws.”

“The Authority is committed to strengthening its partnerships with the various relevant entities in both the government and the private sector. These strategic partnerships are crucial for successfully implementing the tax system,” H.E. Al Bustani explained, adding that the FTA is also dedicated to organising continuous awareness campaigns, seminars, and workshops for all business sectors.

In a session marked with great interaction from attendees, the FTA experts went into the details of the upcoming phase two of the ‘Marking Tobacco and Tobacco Products Scheme’, noting that as of November 1, 2019, the Digital Tax Stamps will be made available for purchase, where producers and importers of waterpipe tobacco (‘Mu’assel’) and electrically heated cigarettes are required to place them on these products to indicate that all due taxes have been settled.

As of March 1, 2020, it will be prohibited to import into the UAE any of the Excise Goods outlined in FTA Decision No. (2) of 2019 on Marking Tobacco and Tobacco Products, if they do not bear the Stamps. Then starting on June 1, 2020, it will no longer be permissible to supply, transfer, store, or possess said Excise Goods in the UAE unless they have the Stamps.

The FTA representatives explained that Digital Tax Stamps – which boast advanced security features that prevent any attempts at counterfeits – will be placed on the packaging of tobacco products and registered in the FTA database; the Stamps contain data that can be read with a dedicated device used by inspectors, authorised by the Authority or the Departments of Economic Development, as well as customs employees. These devices help verify that the Stamps used are authentic, and make sure all taxes due on these products have been paid.

They described how the system works and introduced the tools available to verify the existence of the Stamps, in an effort to enhance participants’ awareness of the regulatory aspects of the tax system. The experts also outlined the successive stages for implementing the system, and the products that will be taxed at each stage. They presented the laws and legislation regulating this system, including Cabinet Decision No. (42) of 2018 on Marking Tobacco and Tobacco Products, which outlines the mechanism to place the Digital Tax Stamps indicating that Excise Tax has been paid. Tobacco manufacturers are required to place the Stamps on the products within the production facility immediately after packaging, if produced in the UAE, or prior to importing them if they are produced abroad, in the position and manner determined by the Federal Tax Authority for each product.

The FTA experts called on all businesses involved in the manufacture and supply of tobacco and tobacco products, who are all subject to Excise Tax, to comply with the Scheme and cooperate with the Authority to implement it accurately and effectively, to protect Taxable Persons’ rights, and to ensure transparency in all procedures.

Participants at the workshop applauded the Federal Tax Authority for its efforts to raise awareness about the UAE tax system and the procedures put in place to implement it across the country. They praised the FTA’s responsiveness and the consistent communication it maintains with businesses, reiterating their commitment to implementing the tax system and educating their customers about its objectives. Attendees called for similar events to be organised in the future to maintain open lines of communication, where issues that come up during on-the-ground implementation can be raised.

For its part, the Authority reaffirmed its dedication to communicating with all business sectors to listen to their opinions and concerns, and discuss solutions for any obstacles they may face in order to ensure a smooth execution of UAE tax regulations.

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