The Federal Tax Authority (FTA) has announced that businesses must complete Corporate Tax registration within 90 days from the Date of Incorporation / MOA.
The UAE introduced Excise Tax in 2017 to curb the consumption of harmful products and generate revenue. The tax applies to specific goods like tobacco, energy drinks, soft drinks, and e-cigarettes. Compliance with Excise Tax regulations is crucial for businesses to avoid costly fines and penalties. In this blog, we will explore common mistakes that lead to Excise Tax fines and provide guidance on how to avoid them.
Understanding Excise Tax in the UAE
The Federal Tax Authority (FTA) oversees Excise Tax implementation in the UAE. The tax applies to:
- Tobacco and tobacco products
- Energy drinks
- Soft drinks
- E-cigarettes
Businesses that import, manufacture, or distribute excisable goods must register with the FTA for Excise Tax before placing the goods on the UAE market, and must comply with the full set of regulations.
Common Mistakes That Lead to Excise Tax Fines
- Late or Missed Registration: If a business becomes liable for excise tax and fails to register within the timeframe set by the FTA (typically 30 days of first liable activity), this will attract fixed penalties (for example, AED 10,000 for late registration) and possible other sanctions.
- Incorrect or Incomplete Tax Filings: Errors in tax return filings—such as inaccurate quantities, values, or tax amounts—can trigger penalties. This is where TAX Consultant's services prove invaluable, helping ensure all filings are accurate and submitted on time.
- Failure to Maintain Records: Not retaining supporting documentation for the required period can result in fines and penalties.
- Wrong Product Classification: Misclassifying items to avoid excise tax can lead to significant fines and penalties.
- Unreported Stock Movements: Businesses must report transfers, destruction or removal of excisable goods (including between designated zones or free zones) in line with FTA movement-control rules (including digital tax stamps for tobacco/vaping), and failure to do so can result in fixed and variable penalties and backdated tax assessments.
Penalties for Non-Compliance
The FTA can impose various penalties for non-compliance, including:
- Monetary fines
- License suspension
Real-world examples of fines imposed on businesses for non-compliance highlight the importance of adhering to Excise Tax regulations.
How to Avoid Excise Tax Fines in the UAE?
To avoid costly fines and penalties, businesses can take the following steps:
- Register early with the FTA: Ensure timely registration to avoid late registration penalties.
- Consult with tax experts regularly: Seek expert advice to ensure compliance with Excise Tax regulations.
- Automate excise tax filing with approved software: Use approved software to automate tax filing and reduce errors.
- Conduct internal audits to identify risk areas: Regularly review business processes to identify potential risk areas and take corrective action. A professional TAX Consultant can assist with this.
Conclusion
Compliance with Excise Tax regulations is important for businesses in the UAE to avoid costly fines and penalties. By understanding common mistakes and taking steps to avoid them, businesses can ensure compliance and minimize risks. Seek expert advice and take proactive measures to ensure your business stays compliant with Excise Tax regulations.
