‘Marking Tobacco and Tobacco Products Scheme’ to Be Implemented on Shisha Tobacco Products starting from Q4 2019

  • The Scheme was successfully implemented on cigarettes to allow for electronic tracking and for combating tax evasion and manipulation.
  • The Federal Tax Authority held an awareness meeting with shisha tobacco manufacturers, importers, and distributors. 
  • E. Khalid Al Bustani: The Authority maintains contact with all stakeholders in the sector to guarantee the Scheme is implemented successfully and effectively.

The Federal Tax Authority (FTA) revealed plans to launch phase two of the “Marking Tobacco and Tobacco Products Scheme” starting from Q4 2019, expanding it to cover tobacco products used in shisha, be they imported or produced and distributed locally.

The Scheme is already in force on cigarettes, allowing for electronically tracking them from production and until they reach the end consumer, in order to ensure full compliance with Excise Tax laws on tobacco and tobacco products.

The announcement took place during an awareness meeting the FTA organised on Sunday (February 17, 2019) in Dubai to discuss the “Marking Tobacco and Tobacco Products Scheme”, its procedures and objectives. The workshop was inaugurated by FTA Director General His Excellency Khalid Ali Al Bustani, and attended by local and international manufacturers, importers, and distributors of shisha tobacco products in UAE markets and free zones, as well as officials from the Authority, experts, and representatives from the international company operating the Scheme.

The Scheme’s first phase came into effect on January 1, 2019, covering all types of imported and domestically produced and distributed cigarettes. The Digital Marks were made available to producers and importers of all kinds of cigarettes to place on cigarette packs before they leave the factory to local markets, which allows them to ensure due Excise Tax has been paid. As of May 1, 2019, the import of any type of cigarettes into the UAE not bearing the Digital Marks will be prohibited; meanwhile, the sale of cigarettes packs not bearing the Marks will be prohibited across UAE markets as of August 2019.

Cabinet Decision No. (42) of 2018 on Marking Tobacco and Tobacco Products, issued in July 2018, outlined a holistic control framework to support the FTA’s tax collection efforts and curb tax evasion in collaboration with all relevant entities. The objective is to synchronise procedures and protect taxpayers’ rights; the Decision stipulated that the Digital Marks be fixed on specified Excise Goods within the production facility – or prior to importing them in the case of imported products.

In November 2018, FTA Chairman’s Decision No. (3) for 2018 on Implementing the Marking Tobacco and Tobacco Products Scheme specified the dates when the Digital Marks will be made available in the UAE, as well as the requirements for storing them and the procedures for placing them on the products in the specific location set by the Authority. The Decision went into effect on January 1, 2019, affecting all types of cigarettes.

“This meeting is part of the Federal Tax Authority’s efforts to maintain direct communication with the representatives of the tobacco companies and all other stakeholders in the sector, as well as with the system operator who developed the Digital Marks to be placed on tobacco products,” said H.E. Al Bustani. “It allows us to review our plan of action and go over the requirements needed to implement the scheme in its second phase. The meeting follows extensive communication with concerned companies and with the system operator; it seeks to synchronise systems and improve coordination among all parties involved in order to ensure the successful and effective application of the system.

“The UAE is the first in the region to implement the system, which seeks, first and foremost, to prevent tax evasion and support the Authority’s tax collection efforts in close cooperation with relevant authorities,” H.E. added. “This guarantees Taxpayers’ rights, enhances competitiveness, and promotes transparency in all transactions carried out with the FTA. The Scheme presents innovative solutions to support inspection efforts at customs ports and markets to prevent the sale of products where due taxes have not been settled. The Digital Marks placed on the products contain accurate tax-related data that can be read with an advanced and dedicated device.”

H.E. Al Bustani explained: “The Scheme seeks also provides a clear framework for assessing the quantities of tobacco and tobacco products circulated within the UAE, and to ensure that these products comply with international standards in the sector. This, in turn, allows relevant authorities to remain up to date with all the developments taking place in this field, as well as to combat commercial fraud.”

“The FTA is committed to implementing its strategy and engaging all stakeholders in the public and private sectors in discussions on new systems set to be implemented by the Authority,” the FTA Director General noted. “To that end, several meetings were held with representatives of tobacco companies, tobacco traders, and the company tasked with operating the system for the Marking Tobacco and Tobacco Products Scheme, to look over the action plan, requirements, and timeline for implementing the Scheme. Additionally, the FTA maintains ongoing communication with concerned companies to help them adapt their systems to meet all requirements, as well as to coordinate between all parties involved, including customs departments, departments of economic development, and producers and importers of tobacco and tobacco products.”

The Federal Tax Authority explained that implementing the Marking Tobacco and Tobacco Products Scheme on imported and locally produced shisha tobacco will be done according to a timeline beginning by Q4 2019, where shisha tobacco producers and importers will be able to place their orders for Digital Marks once the FTA adopts them. They can then proceed to place them on the product packaging before they leave the production facility to hit the shelves at local markets. This makes it possible to determine whether Excise Taxes due on these tobacco products have been settled. In its second stage, the Scheme will include prohibiting the import of any type of shisha tobacco into the UAE if they do not bear the Digital Marks. The third and final stage, meanwhile, will see the sale of all shisha tobacco not bearing the Digital Marks prohibited across all UAE markets.

The Authority urged all businesses subject to Excise Tax to comply with the new system’s regulations for manufacturing and supplying tobacco and tobacco products, calling on them to cooperate with the FTA to effectively implement the system and avoid exposure to administrative penalties. The FTA went on to note that the UAE has successfully developed one of the most advanced legislative systems in the world, setting simple and easy-to-implement tax procedures that were developed following extensive studies of all options and international success stories.

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