|25 May, 2019

UAE implements penalties for violating excise duty stamp of tobacco products

Up to $50K fine to be slapped on people who would commit certain violations

Image used for illustrative purpose A woman lights a cigarette in this illustration picture taken in Paris, October 8, 2014.

Image used for illustrative purpose A woman lights a cigarette in this illustration picture taken in Paris, October 8, 2014.

REUTERS/Christian Hartmann

The Federal Tax Authority (FTA) on Saturday announced that penalties have been set for nine types of violations of the Digital Tax Stamp Scheme for marking tobacco and tobacco products to protect consumers, prevent contraband, low-quality products from entering local markets and halt sales of smuggled goods in the UAE.

According to the penalties chart enclosed in the Cabinet decision, a person who possesses or handles designated excise goods that do not carry a mark - the digital tax stamp - will incur a penalty of Dh50,000 and 50 per cent of the excise tax due on the designated excise goods.

If a person knowingly allows his premises to be used for the sale of unmarked designated excise goods in the UAE, 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 affixed to designated excise goods, they would be 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 the 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 in August 2019.

This is part of the timeline for the Marking Tobacco and Tobacco Products Scheme, which went into effect last January 1 and allows electronic tracking of cigarette packs from production until they reach end consumers to ensure full compliance with excise tax obligations.

Meanwhile, 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 is committed. In the event where 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 would be applicable.

The FTA said in case a person fails to comply within time limits for returning unused marks to the authority, the penalty is Dh50,000 per incident, whereas failure to affix digital tax stamps to designated excise goods in the manner and location specified by the authority exposes the person in question to an administrative penalty of Dh25,000 for the first violation and Dh50,000 in case of repetition.

Furthermore, the penalties' chart indicated that if a person conducts unauthorised trading, swapping, selling, or otherwise supplying of digital tax 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 marks that had previously been used on a designated excise good, they would be subject to a penalty of Dh50,000 and 50 per cent of the excise tax due.

The FTA asserted that the scheme will be gradually expanded to cover all tobacco products and support the authority's efforts to collect taxes, combat commercial fraud, and protect consumers against low-quality, contraband products that harm their health and the environment. The scheme also facilitates inspection and control at customs ports and markets to halt sales of contraband products.

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