Tobacco products to be digitally tracked in UAE
Starting from Jan 1, products will be marked to indicate due taxes were settled
Abu Dhabi: A scheme to mark tobacco and tobacco products, allowing for tracking them digitally from their production until they reach the end-consumer, will go into effect on January 1, 2019.
The decision states that as of May 1, 2019, it will not be permissible to import designated excise goods into the UAE which do not have these markings. Similarly as of August 1, 2019, it will not be permissible to supply designated excise goods in the UAE which do not have the markings.
Shaikh Hamdan Bin Rashid Al Maktoum, Deputy Ruler of Dubai and Minister of Finance, and Chairman of the Federal Tax Authority (FTA) issued a decision regarding the implementation of the marking tobacco and tobacco products scheme that determined the dates when the digital markings will be applicable in the UAE, and outlined the requirements and procedures for storing them.
The decision affects all types of cigarettes sold locally — whether imported or locally produced — with plans to gradually expand the scheme to include all tobacco products. The products will be digitally tracked to guarantee full compliance with excise tax requirements on tobacco products.
The authority explained that the scheme establishes an integrated, accurate and effective control framework that supports its efforts to combat tax evasion, in collaboration with the relevant authorities, and to implement a unified set of procedures to safeguard taxable persons’ rights and maintain transparency in operations.
The FTA stressed the need for tobacco suppliers to abide by the scheme in order to avoid penalties, which could include being banned from exercising their business activities until full compliance is achieved. The scheme facilitates inspection and control procedures at customs ports and markets to prohibit the sale of products where due taxes have not been collected. Marks will be placed on the packaging of tobacco products and registered in the FTA’s database; they contain data that can be read using special devices.
The new decision — titled Decision No. 03 of 2018 — comprises four clauses; it states that as of January 1, 2019, the markings will be made available for importers or producers of designated excise goods, including cigarettes, to purchase and place on their products, indicating that due taxes have been settled.
The decision stressed that markings must be securely stored prior to being affixed to the designated excise goods in accordance with the following security requirements: Markings must be stored in a manner such that they cannot be accessed by unauthorised personnel; records must be maintained showing the quantity of markings held prior to being affixed to designated excise goods; Markings must be stored in a manner preventing exposure to substances or elements which could compromise their physical integrity; and the necessary measures must be taken to ensure markings are not put to unauthorised use, or exposed to being duplicated, copied or otherwise tampered with in any other way.
The decision states that the person storing markings shall be required to provide such information and data as requested by the Authority in order to confirm that he has stored markings in accordance with the decision.
Cabinet Decision No. 42 of 2018 on Marking Tobacco and Tobacco Products specified the procedure to place the markings on tobacco and tobacco products as a way to indicate that the excise tax due on these goods had been settled. Producers are required to place the markings on the designated excise goods in the manner and specific location determined by the FTA for each product.
According to the Cabinet decision, the authority may vary the method and form of the markings and the conditions for applying them. This includes determining the cases where no marking is required, the method of placing the marking and its location on the designated excise goods. The Decision specifies that the markings must be placed on the excise goods at the facility where they are manufactured, if they are made in the UAE, following the packaging process, or at a location outside the UAE if they are imported.
The Federal Tax Authority asserted that the new decision is in line with its efforts to collect taxes, combat tax evasion in cooperation with relevant authorities, and implement unified procedures to guarantee the rights and duties of taxable persons and ensure transparency in the procedures governing their dealings with the authority.