After KSA, UAE is the second Gulf country to publish the law on Excise taxes. Excise goods affected by this law include tobacco, energy drinks, and carbonated drinks. The excise tax rates to be imposed are 100% on tobacco products and energy drinks, and 50% on carbonated drinks. This means that if a can of Redbull costs AED 7 in supermarkets, it will now cost AED 14. Whereas a soft drink can that costs AED 1.5, will now be sold at AED 2.25. According to the UAE’s FTA (Federal Tax Authority), around 250 companies will be subject to the excise tax law. The excise tax law goes into effect on the 1st of October.

Companies that produce, import, or store excisable goods would be able to register with the federal tax authority in September.

Last month, the UAE issued the Tax Procedural Law (federal law no. 7 of 2017), which provides guidance on the administration, collection, and enforcement of the upcoming Tax laws, including the VAT law that goes into effect on January the 1st, 2018.

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The following are need to know highlights of the Tax Procedural law gathered by the KhaleejTimes:

Registration and Requirements:

  • Businesses are required to self-assess their eligibility to register for tax.
  • Registered businesses are expected to keep all disclosed information up-to-date and in correct format.
  • Registered businesses are required to file tax returns on time and correctly. The Tax procedural law allows for the possibility for registered businesses to correct the return submitted in the previous tax period.
  • Businesses are required to keep accounting records, commercial books, and all tax-related information.
  • Returns and documentations to be submitted to the FTA should be in Arabic.

Procedures:

  • Registered businesses have the option of appointing a tax agent to represent them in front of the FTA.
  • Registered businesses need to ensure that all information submitted is correct and updated (as needed), as notifications from the FTA shall be sent to the company’s submitted address.

Audits:

  • Tax audit can take place at a registered business’s office, at the FTA’s premises, or any place that the business keeps records in.
  • Registered businesses will receive a 5-business day notice prior to an audit by the Federal Tax Authority, and normally will take place during the FTA’s working hours.
  • In some exceptions, the FTA could conduct unannounced visits, which could result in closing business for up to 72 hours to conduct the tax audit.
  • The FTA would inform the results and supply a registered business with the documents/data used to arrive at the said results if requested by the business.

Penalties

In case of non-compliance by registered businesses, the FTA may:

  • Issue tax assessment based on their own method of calculation.
  • Notify a registered business within 5-business days of an administrative penalties assessment. The penalty cannot be less than AED 500 and more than three times the amount of tax due.

Objections

  • Reconsideration requests are submitted to tax dispute resolution committees.
  • Through UAE’s federal court when the penalty exceeds AED 100,000.

Payable Tax and Refunds

  • To avoid penalties, the payable tax should be paid within the specified deadline.
  • Registered businesses can apply for a refund for excess tax paid, which in return needs to be approved by the FTA.

To avoid penalties, businesses should make sure to register on time, while having all the required and needed information. On the other hand, they should also focus on planning and conducting a VAT impact assessment. VAT impact assessments should help in identifying limitations and in planning a VAT efficient operating and trading structures. To learn more about how our experts can help you with your VAT impact assessments click here.

For VAT support, consultations, and inquiries contact: tax@nuummite.com

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