UAE’s new excise tax tobacco scheme to apply to shisha from Q4

The UAE’s Federal Tax Authority (FTA) has revealed that its ‘marking tobacco scheme’, which ensures compliance with excise tax laws, will apply to shisha products from the fourth quarter of this year.

The first phase of the scheme was implemented at the start of this year and covers all types of imported and domestically produced and distributed cigarettes.

The scheme works by means of a stamp or digital seal that is installed on tobacco product packaging, which is registered in the authority’s database and read by special devices to ensure that the tax on the products is paid.

The launch of the scheme comes after the UAE imposed a 100 per cent excise tax on tobacco products from October 2017.

As of May 1, 2019, the import of any type of cigarettes into the UAE not bearing the digital marks will be prohibited.

Meanwhile, the sale of cigarettes packs not bearing the marks will be prohibited in the country from August 2019.

Phase two, set to begin from Q4 2019, will expand the scheme to cover tobacco products used in shisha, be they imported or produced and distributed locally, a statement said.

Shisha tobacco producers and importers will be able to place their orders for digital marks once the FTA adopts them. They can then place the marks on the packaging before the products leave the production facility.

In its second stage, the scheme will include prohibiting the import of any type of shisha tobacco into the UAE if they do not bear the digital marks. The third and final stage will see the sale of all shisha tobacco not bearing the digital marks banned across the country.

The scheme aims to support the FTA’s tax collection efforts, curb tax evasion, synchronise procedures and protect taxpayers’ rights, the authority said.

The UAE is the first in the region to implement the system, said FTA director general Khalid Ali Al Bustani.

“This guarantees taxpayers’ rights, enhances competitiveness, and promotes transparency in all transactions carried out with the FTA. The scheme also presents innovative solutions to support inspection efforts at customs ports and markets to prevent the sale of products where due taxes have not been settled,” he said.

“The scheme seeks also provides a clear framework for assessing the quantities of tobacco and tobacco products circulated within the UAE, and to ensure that these products comply with international standards in the sector. This, in turn, allows relevant authorities to remain up to date with all the developments taking place in this field, as well as to combat commercial fraud.”

He also confirmed that several meetings were held with representatives of tobacco companies, tobacco traders, and the company tasked with operating the scheme to look over the action plan, requirements, and timeline for implementing it.

The FTA urged all businesses subject to excise tax to comply with the new system’s regulations for manufacturing and supplying tobacco products to avoid exposure to administrative penalties.