UAE Excise Tax: New Clarification on Lost or Deficient Goods in Designated Zones

The UAE Federal Tax Authority (FTA) has released an Excise Tax Public Clarification (EXTP007) on Excise goods that are deficient or short of quantity and the process for the destruction of Excise goods within a Designated Zone (DZ). The clarification offers more clarity on the FTA’s stance on instances where relief from excise tax can be availed for deficient goods or goods that are found to be short of the expected quantity within a DZ. However, businesses are advised to consult with tax agents in the UAE before making any decision regarding the missing or deficient goods in a DZ.

This article offers further insights into the FTA’s clarification, which you can use to make any excise tax decisions regarding the deficient or missing goods within a DZ. Read ahead to get more information:

What Is the Excise Tax Relief Available for Lost or Deficient Goods?

Goods located in a DZ that are classified as wastage, deficient or short of expected quantity will be treated by the FTA as released for consumption and therefore subject to excise tax in the UAE. However, as an exception, Cabinet Decision No. 37 of 2017 on the Executive Regulation of the Federal Decree-Law No. 7 of 2017 allows relief from accounting for excise tax on goods located within a DZ in certain cases.

Tax Relief on Wastage of Goods in a Designated Zone

Article 12 (3) of the Executive Regulation states that excise goods will be treated as leaving a DZ and released for circulation if they are found to be deficient or there is a shortage in their quantity from a DZ, or during a transfer between designated zones, or while held in a suspension arrangement is in line with the Customs Laws. The excise tax will be due on the volume of goods that are found to have a shortage or deficiency from the stock level which entered the DZ or were manufactured within the DZ. However, relief will be available on such goods under the following conditions:

  • The warehouse keeper responsible for the goods notifies the FTA about the stock deficiency or shortage of quantity within 30 days of identifying it; and
  • The FTA accepts that the shortage of quantity or deficiency of the excise goods is due to a legitimate cause

Process of Obtaining an Excise Tax Relief for Deficient Goods

To obtain relief or to get approval to destroy the excise goods, the warehouse keeper responsible for the DZ need to submit a request to the FTA with respect to the deficient goods or those found to be short in quantity. The request can be made by submitting a declaration to the FTA. The declaration to the FTA must be made within 30 days of discovering the deficiency or shortage of quantity. Tax agents in Dubai can help the businesses carry out the following major steps:

  1. The taxable person who owns the goods needs to complete and submit Lost and Damaged Declaration EX203B through FTA’s e-services portal
  2. The declaration will be then automatically forwarded to the warehouse keeper of the DZ for approval
  3. The warehouse keeper approves the declaration to be submitted to the FTA
  4. Any additional information can be sent through a dedicated email address (deficiencyandshortage@tax.gov.ae)

Documents/Information Required for Submitting Declaration

While submitting the declaration to the FTA, businesses must check whether they have included all the mandatory information or documents. This must be done meticulously and this is where the assistance of tax agents in Dubai may come in handy for the taxable persons. The declaration submitted to the FTA must contain the following information:

  1. Tax Registration Number of the owner of the goods
  2. Warehouse keeper’s registration number
  3. Information on the location where the destruction of goods is planned (if applicable)
  4. Reference number of the DZ where the goods are being held
  5. Date in which the goods entered the DZ
  6. Date of discovering the deficiency, damage or shortage of goods
  7. Reason for the notification (cause of the shortage or deficiency)
  8. Reason for the request for approval of destruction (if applicable)
  9. Supporting documents validating all the information provided to the FTA
  10. Description of the type of goods to be destroyed
  11. Value of excise tax due on the goods

Causes of Approval for Submissions

The FTA will accept an application only if it is found to have a legitimate cause. Tax agents in Dubai can advise the businesses on whether their application qualifies for FTA approval. The FTA will accept the application if the reason for deficiency or shortage falls under any of the following:

  • Force majeure (circumstances beyond the control of warehouse keeper or owner of goods)
  • Natural wastage and shortage (unintentional spoiling, shortage, contamination, unfit for consumption etc.)
  • Wastage or shortage in the course of production

Hire the Services of the Best Tax Agents in Dubai, UAE

Tax agents in Dubai such as Jitendra Chartered Accountants (JCA) can assist businesses to obtain excise tax relief as envisaged under Cabinet Decision No. 37 of 2017 on the Executive Regulation of the Federal Decree-Law No. 7 of 2017. If the goods in a DZ are deficient or short of quantity, the owner of the goods can apply for relief from excise tax. JCA has a team of experienced excise tax consultants in Dubai who can help the taxable entities to assess whether there is a legitimate cause for the deficiency/shortage, prepare the application, and submit the application with relevant information & documents to the FTA.