The Federal Tax Authority (FTA) has announced that businesses must complete Corporate Tax registration within 90 days from the Date of Incorporation / MOA.
Effective July 1, 2025, the UAE Federal Tax Authority (FTA) has ushered in a significant shift in excise tax in UAE compliance with Decision No. 6 of 2025. This regulation introduces mandatory protocols for managing “natural shortages” of excise goods within designated zones.
If your business handles excise goods, especially in manufacturing, warehousing, or transport, these changes will directly impact your operations, reporting practices, and tax liabilities.
Understanding the Concept: What is a “Natural Shortage”?
A natural shortage is a reduction in quantity of excise goods due to their inherent physical characteristics. This could occur during:
- Manufacturing (e.g. evaporation during blending or distillation)
- Storage (e.g. leakage or spoilage over time)
- Transportation (e.g. loss from temperature changes)
Shortages due to inherent physical characteristics of goods are exempt from being treated as a release for consumption, provided they are properly declared. However, declaring them does not require pre-approval. a declaration must simply be submitted via EmaraTax (supported by the ICE report) with a valid percentage that does not exceed the limits specified within the ICE report.
Who is Impacted?
The Decision applies to:
- Warehouse Keepers
- Taxable Persons under the Excise Tax Law
- Designated Zones that store or process excise goods
Industries commonly affected include alcohol, tobacco, sugary beverages, and fuel.
Key Procedural Requirements
1. Independent Competent Entity (ICE) Involvement
Businesses must engage an FTA-approved Independent Competent Entity to:
- Conduct on-site inspections
- Assess actual and expected shortage levels using data from at least 6 months
- Issue an official Natural Shortage Report specifying permitted thresholds by product
2. Mandatory Documentation Standards
The following records must be maintained for every excise good subject to natural loss:
- Detailed process maps showing stages of loss
- Production formulas and estimated loss rates
- Equipment specs and operating manuals
- Historical shortage data and actual vs. expected loss
- Most recent ICE-issued Report
- Valid Declarations filed via FTA system
These records must be submitted upon request and retained for audit trail purposes.
3. Declaration Procedures
To remain compliant:
Requirement | Summary |
Submit Declaration | File through the FTA portal, citing ICE-approved loss percentages |
Frequency | Submit once per tax period; each ICE report valid for a maximum of 6 months |
Updates | Inform ICE within 20 business days of any changes in production or storage |
Renewals | Annual ICE re-evaluation using data from the past and upcoming 12 months |
Who Qualifies as an Independent Competent Entity?
- ICEs are laboratories or technical agencies vetted by the FTA
- A committee within FTA assesses and publishes the list of approved entities
- Businesses cannot self-determine shortage levels without involving ICE
Tip: Choose an ICE experienced in your product category to ensure accurate representation of technical realities.
Transitional Provision to Note
Reports issued between July 1 – December 31, 2025 will be retroactively valid from July 1, granting businesses a one-year grace window for adjustment if the process is completed on time.
Strategic and Legal Implications
This regulation reflects the FTA’s intent to:
- Introduce quantifiable standards to prevent arbitrary declarations
- Increase transparency, traceability, and audit readiness
- Align UAE practice with global tax administration norms
Non-compliance Risks:
Disallowed deductions for unsubstantiated shortages
- Potential audits or site inspections
- Financial penalties for undeclared loss overages
- Erosion of FTA trust and reputational damage
Compliance Roadmap for Your Team
Here’s a step-by-step checklist to align with the new Decision:
Step | Action | Responsible Department |
1 | Identify goods subject to natural loss | Compliance / Tax |
2 | Engage FTA-approved ICE | Procurement / Legal |
3 | Collate historical data, SOPs, and manuals | Operations |
4 | Support ICE field visits & finalize Report | Quality / Engineering |
5 | File Declarations via FTA portal | Tax |
6 | Track renewal dates & operational changes | Compliance |
7 | Train teams on documentation best practices | HR / Training |
Turning Compliance into Competitive Advantage
While FTA Decision No. 6 introduces procedural complexity, it also offers a chance to strengthen internal systems, validate technical processes, and reinforce your position as a compliant and reliable market player. Businesses that adapt proactively will not only avoid penalties but also gain internal visibility over operational efficiencies.
Conclusion
UAE FTA's Decision No. 6 of 2025 has some fresh rules about what counts as acceptable natural shortages in excise goods. Now, you'll need a third party to check your work and keep things current. If your business wants to stay on the right side of the law, get shortages pre-approved if they're within the allowed limits. Also, keep super-organized records for audits. Reyson Badger can guide you through these excise tax changes and help you adjust to the updated regulations. Work with us to remain compliant with rules and steer clear of any penalties.
