The United Arab Emirates (UAE) Federal Tax Authority (FTA) has published an Excise Tax Public Clarification (EXTP007) on Excise goods that are deficient or missing and the process for the destruction of Excise goods within a Designated Zone (DZ).
The Public Clarification provides insight into the FTA’s position on cases where relief from Excise Tax is available for deficient or missing Excise goods within an Excise DZ.
By default, deficient or missing Excise goods within a DZ are considered to be released for consumption and therefore subject to Excise Tax. However, excise tax exemption may be available in the following cases :
1) The warehouse administrator responsible for goods subject to excise tax shall notify the FTA within 30 days of discovering a defect or absence; and
2) The FTA accepts the deficiency or shortage to be due to a legitimate cause.
In order to notify the FTA, the taxable person who owns the goods must submit declaration EX203B (Lost and Damaged Declaration) on the FTA e-Services Portal, which will then be sent to the warehouse keeper for their approval and submission to the FTA. Information required to be included in the declaration and the possible responses from the FTA are detailed in the public clarification which also provides an email address where additional supporting information can be provided to the FTA.
FTA considers ‘legitimate cause’ to exist in cases of force majeure (circumstances beyond the warehouse keeper or taxable person’s control), natural wastage and shortage (e.g. expiration of goods or moisture loss due to evaporation), and wastage or shortage in the course of production (up to an allowable threshold). EXTP007 provides the supporting documentation required in each.
In addition, Public Clarification points out that if a defective product needs to be disposed of, the FTA may require the product to be inspected before approving the disposal of the product.