FTA implements penalties for tobacco tax violations

Abu Dhabi: The Federal Tax Authority on Saturday said it will begin implementing penalties for violations of the “Marking Tobacco and Tobacco Products Scheme,” which calls for digital tax stamps to be applied to the packaging of tobacco goods before supplying them to local markets.

The Authority said penalties are meant to curb attempts at commercial fraud, and protect consumers from contraband, low-quality products that do not conform with standards and harm health and the environment. The FTA said the mechanisms have been set to implement the new legislation, which outlines the commitments of both the taxpayers and the Authority, and sets mechanisms to tighten controls in UAE markets and ensure governance and transparency.

Penalties have been set for nine types of violations. A person who possesses or handles Designated Excise Goods that do not carry a digital tax stamp incurs a penalty of Dh50,000 and 50 per cent of the excise tax due. If a person knowingly allows his premises to be used for the sale of unstamped goods, that person shall incur a penalty of Dh25,000 for the first violation and Dh50,000 in case of repetition.

If a person alters or prints over Digital Tax Stamps, they are subject to a penalty of Dh50,000 and 50 per cent of the Excise Tax due.

If a person fails to report the movement of designated excise goods, they will incur a penalty of Dh20,000 for each time the violation.

When a person fails to comply with the requirements to securely store the Digital Tax Stamps as determined by the Authority, a fine of Dh50,000 per incident will be applicable.

In case a person fails to comply with time limits for returning unused stamps to the Authority, the penalty is Dh50,000 per incident, whereas failure to affix Digital Tax Stamps in the manner and location specified by the authority results in an administrative penalty of Dh25,000 for the first violation and Dh50,000 in case of repetition.

If a person conducts unauthorised trading, swapping, selling, or otherwise supplying of stamps, they incur fines of Dh25,000 for the first violation and Dh50,000 in case of repetition, in addition to 50 per cent of the amount collected as tax. If a person re-uses stamps that had previously been used, they are subject to a penalty of Dh50,000 and 50 per cent of the Excise Tax due.

As of May 1, 2019, the import of any type of cigarettes into the UAE not bearing Digital Tax Stamps has been prohibited; meanwhile, the sale across UAE markets, or importation or production of all types of cigarettes not bearing Marks will be prohibited as of August 2019. This is part of the timeline for the “Marking Tobacco and Tobacco Products Scheme”, which went into effect on January 1, 2019, and allows for electronically tracking cigarette packs from production and until they reach the end consumers, to ensure full compliance with Excise Tax obligations.

The Federal Tax Authority asserted that the scheme will be gradually expanded to cover all tobacco products.