H.H. Hamdan Bin Rashid Issues Decision to Implement ‘Marking Tobacco and Tobacco Products Scheme’ From January
His Highness Sheikh Hamdan bin Rashid Al Maktoum, Deputy Ruler of Dubai, Minister of Finance and Chairman of the Federal Tax Authority (FTA), issued a Decision regarding the implementation of the Marking Tobacco and Tobacco Products Scheme that determined the dates when the digital Marks will be applicable in the UAE, and outlined the requirements and procedures for storing them.
The Decision stated that the Marking Tobacco and Tobacco Products Scheme will go into effect as of January 1, 2019, affecting all types of cigarettes sold locally – whether imported or locally produced – with plans to gradually expand the Scheme to include all tobacco products, which will be digitally tracked, from production and until they reach the end-consumer, to guarantee full compliance with Excise Tax requirements on tobacco products.
The Authority explained that the Scheme establishes an integrated, accurate and effective control framework that supports its efforts to combat tax evasion, in collaboration with the relevant authorities, and to implement a unified set of procedures to safeguard Taxable Persons’ rights and maintain transparency in operations.
The FTA stressed the need for tobacco suppliers to abide by the Scheme in order to avoid penalties, which could include being banned from exercising their business activities until full compliance is achieved. The Scheme facilitates inspection and control procedures at customs ports and markets to prohibit the sale of products where due taxes have not been collected. Marks will be placed on the packaging of tobacco products and registered in the FTA’s database; they contain data that can be read using special devices.
The new Decision – titled Decision No. (3) of 2018 – comprises four clauses; it states that as of January 1, 2019, the Marks will be made available for importers or producers of Designated Excise Goods, including cigarettes, to purchase and place on their products, indicating that due taxes have been settled.
The Decision states that as of May 1, 2019, it will not be permissible to Import Designated Excise Goods which do not have Marks into the UAE. As of August 1, 2019, it will not be permissible to supply Designated Excise Goods which do not have Marks in the UAE.
The Decision stressed that Marks must be securely stored prior to being affixed to the Designated Excise Goods in accordance with the following security requirements: Marks must be stored in a manner such that they cannot be accessed by unauthorized personnel; records must be maintained showing the quantity of marks held prior to being affixed to Designated Excise Goods; Marks must be stored in a manner preventing exposure to substances or elements which could compromise their physical integrity; and the necessary measures must be taken to ensure Marks are not put to unauthorized use, or exposed to being duplicated, copied or otherwise tampered with in any other way.
The Decision states that the Person storing Marks shall be required to provide such information and data as requested by the Authority in order to confirm that he has stored Marks in accordance with the Decision.
Cabinet Decision No. (42) of 2018 on Marking Tobacco and Tobacco Products specified the procedure to place the Marks on tobacco and tobacco products as a way to indicate that the Excise Tax due on these goods had been settled. Producers are required to place the Marks on the Designated Excise Goods in the manner and specific location determined by the Federal Tax Authority for each product.
According to the Cabinet Decision, the Authority may vary the method and form of the Marks and the conditions for applying them. This includes determining the cases where no Mark is required, the method of placing the mark and its location on the Designated Excise Goods. The Decision specifies that the Marks must be placed on the Excise goods at the facility where they are manufactured, if they are made in the UAE, following the packaging process, or at a location outside the UAE if they are imported.
The Federal Tax Authority asserted that the new Decision is in line with its efforts to collect taxes, combat tax evasion in cooperation with relevant authorities, and implement unified procedures to guarantee the rights and duties of Taxable Persons and ensure transparency in the procedures governing their dealings with the Authority.
Federal Tax Authority
By virtue of this Federal Law by Decree a public federal authority shall be established under the name of the Federal Tax Authority. The headquarters of the authority shall be located in the city of Abu Dhabi. The authority shall be in charge of managing and collecting federal taxes and related fines, distributing tax-generated revenues and applying the tax-related procedures in force in the UAE.
The authority shall be managed by a board of directors chaired by the Minister of Finance and a sufficient number of members to be appointed and remunerated by a Cabinet resolution, based on the chairman’s nomination. The authority shall have an independent annual budget that shall be deemed as public funds and exempted from all taxes and fees.
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