Latest Updates Related to Excise tax – Aug 2022

Summary of Excise Tax Public Clarification on Excise Tax Designated Zones – Calculation of financial guarantees

*DZ- Designated zone

When you are registering for a new DZ or renewing the existing the DZ, the warehouse keeper of the DZ will be required to provide a financial guarantee to the FTA. The Public clarification (EXTP008) provided by FTA guides how financial guarantees in respect of Excise Tax Designated Zones are calculated. From the start of September 2022 the new calculation method will be implemented.

We have noticed that the bank guarantee provided by the warehouse keeper should be with an ‘Auto Renewal Clause’ as the same guarantee will be used at the time of renewal. At the time of renewal (12 months from the registration date), if the guaranteed amount is higher than the existing guarantee, the warehouse keeper is required to provide a guarantee on the increased amount while the existing guarantee remains with FTA based on the ‘Auto-renewal clause’.

How the Bank Guarantee Is Calculated ?

The new approach is based on different variables which include the following

• The Excise tax due on the average month-end stock over a period of twelve months. Previous 12 months are calculated in case of the renewal and forecasted/expected stock for 12 months is taken in consideration for a new DZ registration.
• The compliance history of the relevant taxable person and the Warehouse Keeper
• The number of persons employed by the warehouse keeper as per MOHRE (Ministry of Human Resources & Emiratization).
• Value of Warehouse Keeper’s Assets – as per the Warehouse Keeper’s annual financial statements: the annual financial statements for the latest year ended before the financial guarantee application.
• Residence status.
• The number of years the Applicant is in operation.

The process of calculating the bank guarantee is as per the below steps.

Step 1 – Guarantee Base

The very first step is based on the average month-end stock of the relevant excise goods over the 12 months period. The month-end stock is referred to the closing stock of excise goods in the DZ during the relevant 12-month period.

• For a New DZ registration, the warehouse keeper is required to forecast the expected month-end stock per product for each of these 12 months.
• For Renewal DZ registration, the warehouse keeper is required to submit the actual month-end stock per product for each month of the preceding 12 months.

Step 2 – Financial guarantee percentage

Calculation of preliminary financial guarantee percentage, this is calculated based on residence status, compliance history, financial status and number of years the Applicant is in operation supported with evidential documents.

• The residential status percentage is determined based on whether the legal person with a head office or branch is located in UAE, whether is a citizen of GCC countries or any other person.
• Compliance history percentage depends on whether the FTA has issued one or more Excise tax assessments to the warehouse keeper or any taxable person having excise goods in any of the warehouse keepers’ DZ in the previous 5 years of the registration or renewal. Another factor includes if FTA has liquidated any previous financial guarantee submitted by the warehouse keeper in the preceding 5 years of the registration or renewal.
• The Financial status percentage is based on the assets as per the warehouse keeper’s audited financial statements preceding the application and the number of employees the warehouse keeper has.
• The Number of years of operation percentage depends on whether the warehouse keeper has been operating for the last 5 years at the time of new registration or renewal.

In some instances, the preliminary financial guaranteed percentage may be overridden by a specific guarantee percentage. Hence the final guaranteed percentage is calculated by the preliminary guarantee being substituted by a specific guaranteed percentage in the following cases;

• If no Excise Tax assessments resulting in an Excise Tax difference exceeding 5% of the total Excise Tax due according to tax returns and declarations submitted in a year were issued during the five years preceding the date the FTA requested the financial guarantee.
• If the Warehouse Keeper or any of its key employees was party to or facilitated tax evasion.

KEYNOTES

Excise Stock Movement Guide for Warehouse Keepers who are not Registered for Excise Tax – Aug 2022

Key areas to look for in the guide;

• Non-registered taxpayers: EX204A – Non-Registered Stock Movement Declaration
• First-time declaration for a Stock Owner
• Second consecutive period for a Stock Owner
• Search for non-registered stock movement declaration
• registered taxpayers: EX204 – Opening Stock Declaration
• request to add a product to the FTA list

Excise Tax Clearing Company User Guide | Imports, Release & Consumption- Aug 2022

Key areas to look for in the guide;

• EX201A- Import declaration
• EX201B- Consumed goods & Release declaration

Excise Tax Import Declaration User Guide | Registered and Non-Registered

1. Registered Importers for Excise Tax

• How to complete the EX201- Excise Goods that require customs clearance Form.
• How to make the Excise Tax Payment at the time of filing your Excise Tax return.
• About Customs Declaration
• About the Payment due for VAT at the import

2. Unregistered Importers for Excise Tax

• How to Create and use your e-Services account
• Complete the EX201- Excise Goods that require customs clearance Form
• How to make the Excise Tax Payment at the time of filing your Excise Tax return.
• About Customs Declaration
• About the Payment due for VAT at the import