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How to comply with payment rules and Stockpiling Regulations for Excise Tax in the UAE

Stockpiling refers to the practice of holding a large quantity of excise goods in the free trade area, without paying the tax and intending to sell them in the local market. This practice can affect the tax liability of the stockpiler and the tax system as a whole. If you are dealing with excise goods in the United Arab Emirates (UAE), you must be aware of the excise tax regulations that apply to your business. The UAE government imposes an excise tax on these goods to discourage their consumption and protect public health. The excise tax is governed by the Federal Decree-Law No 7/2017 on Excise Tax and its implementing regulations, such as the Cabinet Decision No. 37/2017. Stockpiling Regulations are one of the main aspects of the excise tax law UAE. Therefore, the UAE government has issued specific rules and conditions for stockpiling in Article 11 and Article 12 of the Cabinet Decision No. 37/2017. In this blog post, we will explain these rules and conditions in detail and help you understand how to comply with them.

What is a Stockpiler?

According to Article 11 of the Cabinet Decision No. 37/2017, a stockpiler is a person who holds "surplus excise goods" in the free trade area and intends to sell them in the state. The free trade area is a part of the UAE that is treated as being outside the customs territory for excise tax purposes. It includes designated zones, which are secure areas where excise goods can be stored without paying the tax, under the supervision of a warehouse keeper. A stockpiler must meet the following criteria to be subject to the excise tax regulations:

  • The stockpiler must own the excise goods on the date when the tax liability arises, the tax rate increases or the excise tax law comes into effect, whichever happens first.
  • The stockpiler must hold more excise goods than their average monthly stock level for that type of goods over 12 months.
  • The stockpiler must have acquired the excise goods before the relevant date mentioned above.
  • The stockpiler must intend to sell the excise goods in the course of their business in the state.

What Are Surplus Excise Goods?

Surplus excise goods are the excess amount of excise goods that a stockpiler holds in the free trade area, beyond their normal stock level. These goods are subject to the excise tax at the applicable rate, regardless of whether they have been previously taxed, exempted, refunded, or deferred. There is an important exception to the definition of surplus excise goods. If a stockpiler sells more excise goods than their average monthly sales for two consecutive months, regardless of their stock level, then all the excise goods that they hold in the free trade area are considered surplus and taxable.

When Are Excise Goods Offered For Consumption?

According to Article 12 of the Cabinet Decision No. 37/2017, excise goods are deemed to be offered for consumption when they are:

  • Removed from a designated zone to the state.
  • Imported into the state from outside the UAE.
  • Produced in the state.
  • The goods are released from a suspension arrangement, which is a system that allows the movement of excise goods without paying the tax, under certain conditions.

When excise goods are offered for consumption, the person who offers them must pay the excise tax to the tax authority, using the methods and procedures specified by the authority. The person who offers the excise goods must also keep accurate and complete records of their transactions and tax payments, and submit them to the tax authority upon request.

Exceptions for Non-Inclusive Tax:

The declared prices of excise goods remain exclusive of tax when certain conditions are met. These conditions include goods procured under an agreement not yet fulfilled before the Decree-Law's initiation, contingent upon:

  • The purchaser intends to combine the goods with another taxable excise item.
  • The purchaser's plan to export the goods beyond the state's confines.
  • The purchaser's classification as a foreign government, international organization, authority, or diplomatic mission, is entitled to tax reimbursement as per Article 21(1) of the Decree-Law.
  • The sale of goods after the Decree-Law's commencement to an individual exporting them to another implementing state, paying tax there, and seeking reimbursement according to Article 21(2) of the Decree-Law.
  • The purchaser intends to resell the goods.

Due Tax In Addition To The Declared Price:

In the aforementioned situations, the tax becomes payable in addition to the supplier's stated price. Stockpiling is a practice that can have significant implications for the excise tax liability of the stockpiler and the tax system as a whole. Therefore, the UAE government has issued clear and comprehensive rules and conditions for stockpiling in Cabinet Decision No. 37/2017, which implements the Federal Decree-Law No 7/2017 on Excise Tax. By understanding and complying with these rules and conditions, stockpilers can avoid any penalties or disputes with the tax authority and contribute to the public health and welfare of the UAE.

Consulting a Tax Expert in Dubai

To ensure full compliance with the excise tax regulations and stockpiling rules outlined in UAE law, it's advisable for businesses dealing with excise goods to seek guidance from a qualified tax consultant in Dubai.

Shayan Khan is an experienced Corporate Tax Consultant with over 4 years of expertise. He's skilled in negotiating and investigating taxes with government bodies like the Federal Tax Authority. Shayan excels in reviewing and drafting tax documents and offers strategic advice on complex tax matters. Clients trust his guidance in navigating tax procedures and minimizing liabilities. Read more