Effective Changes to the Excise Tax in the UAE

From October 14th, 2022, the UAE Ministry of Finance has made  changes to the excise regulations, aimed at minimizing tax avoidance, easing obligations and supporting business.

Five years since its establishment, the “Federal Decree-Law n.7 of 2017 on Excise Tax” has finally been updated.

The notable amendment made to the Law is the introduction of article 25bis, which highlights the statute of limitations, relating to tax audits and assessments. The new article provides that the conduct of tax audits or the issuance of tax assessments is limited to a period of five years from the end of the relevant tax period. However, this timeline could be extended where the taxable person has been notified before the end of these 5 years. Another exception is in the case of tax evasion: in this eventuality, the tax audit can be conducted, or the tax assessment can be issued, within 15 years. The same timeline will apply in cases of failure of tax registration or cases of delay.

Another major amendment brought into the Law is the registration of exceptions for persons importing accessible goods for purposes other than conducting business; however, this provision does not exempt the person from paying any applicable excise tax on imports.

Any amount collected as excise tax needs to be remitted to the competent authority even if the product is declared as a non-excisable product for tax audit. It is advisable to conduct an excise tax ‘health check’ to ensure that all transactions are in compliance with the relevant law and regulations.

Moreover, it shall be noted that, concerning the clarification on the amendment of applicable penalties, a self-declared tax difference leads to a penalty of between 5% to 40% depending on the year of the declaration. If instead, any inaccuracy is discovered through the tax office, the penalty imposed will be in excess of 50,000 AED or 50% of the tax. As this matter could lead to a significant difference in the final burden, it is strongly advisable to rely on a professional consultant when dealing with excise matters.

At PHC Advisory we are highly specialized on the excise policy in all jurisdictions, including UAE. Feel free to reach out to us at info@phcadvisory.com to find out about our international professional tax and accounting services that your company could benefit from.