Sale of cigarettes not bearing red digital tax stamps prohibited across local markets

The Federal Tax Authority, FTA, cautioned that owning or selling cigarettes not bearing the ‘Red Digital Tax Stamps’ will be prohibited across local markets as of 1st August 2019, as per the timeline for the ‘Marking Tobacco and Tobacco Products Scheme’, which went into effect on 1st January 2019.

The FTA had issued its Decision No. 03 of 2018 on Implementing the Marking Tobacco and Tobacco Products Scheme, which seeks to electronically track cigarettes packs from the production facility and until they reach the end-consumer, in order to protect consumers from low-quality products, combat tax evasion, and ensure that the Excise Tax due on these products has been settled.

In a press statement issued today, the Authority called on all cigarette producers, importers, dealers, and consumers in the UAE to comply with the Decision in order to avoid the penalties outlined in the Cabinet Decision on Violations of Procedures for Applying Digital Tax Stamps on Tobacco and Tobacco Products. The objective, the FTA explained, is to curb attempts at commercial fraud and protect consumers from sub-standard products that harm their health and the environment, in addition to combatting tax evasion.

The Federal Tax Authority explained that two types of Digital Tax Stamps were approved, the first of which is Red and meant to be placed on the packaging of tobacco products sold at all local markets, as well as at duty-free in arrival lounges. The second type, meanwhile, is Green and earmarked for tobacco products sold at duty-free in departure lounges.

FTA Director General Khalid Ali Al Bustani highlighted the remarkable response from relevant Taxable Persons to the Digital Tax Stamps procedures, noting that the Authority had organised a series of training workshops for inspectors at Departments of Economic Development and local Customs Departments across the UAE, exploring the ‘Objectives and Procedures for Implementing the Marking Tobacco and Tobacco Products Scheme’.

"The workshops were held in preparation for the inspection campaigns, conducted to ensure compliance with the ban on the sale of all types of cigarettes not bearing the Digital Tax Stamps in local markets as of 1st August 2019," Al Bustani added. "These courses are of great value considering their contribution to the successful implementation of the new Scheme, which facilitates inspections, and strengthens market controls to prevent the sale of products that have not met their tax obligations."

Digital Tax Stamps will be placed on the packaging of tobacco products and registered in the FTA database; the Stamps contain data that can be read with a dedicated device used by authorised inspectors to make sure all taxes due on these products have been paid.

During the workshops, FTA representatives shed light on the legislation and Decisions pertaining to the Scheme, including Cabinet Decision No. 42 of 2018 on Marking Tobacco and Tobacco Products, which outlines the mechanism to place the Digital Tax Stamps indicating that Excise Tax has been paid.

Tobacco manufacturers are required to place the Stamps on the products within the production facility immediately after packaging, if produced in the UAE, or prior to importing them if they are produced abroad, in the position and manner determined by the Federal Tax Authority.

The FTA Director General called on all businesses involved in the manufacture and supply of tobacco and tobacco products, who are all subject to Excise Tax, to comply with the Scheme and cooperate with the Authority to implement it accurately and effectively.

Al Bustani asserted that the Decision supports the FTA’s efforts to collect taxes and combat tax evasion, in collaboration with the relevant entities, to protect Taxable Persons’ rights and ensure transparency in the procedures governing their dealings with the Federal Tax Authority.

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