Dealing in Excisable goods? Get ready for FTA Excise Audit
If you are a producer/importer/warehouse keeper of excisable goods, MBG Corporate Services can help mitigate risks and identify opportunities
The introduction of Excise Tax has impacted several aspects of business including cash flows, profitability, pricing, statutory compliances, invoicing, documentation, record keeping, IT systems, contract terms, and product demand. It is therefore important for businesses to consider aspects like timely registration of products with Federal Tax Authority (FTA), ascertaining taxability of products, assessing the areas and magnitude of impact, filing returns, deciding on converting a warehouse into an excise designated zone, making representations to the authority in case of audit from FTA, etc.
Under the regulations, there is an option for companies to defer excise tax when goods are moved to an approved excise-designated zone (i.e., goods are not cleared for consumption within the UAE). Apart from Excise Tax deferment, storage in the excise designated zone is relevant for companies exporting excisable goods. Businesses who do not store the goods in the excise designated zone must pay the Excise Tax and, in the case of exports, apply later for a refund. This leads to blockage of cash.
For deferment of excise tax liability, the existing warehouse must be converted into an excise designated zone. This would mean that businesses need not change the location of their operation or warehouse. They have to apply for a designated zone and warehouse keeper registration only for converting an existing warehouse into an excise tax designated zone subject to meeting conditions set by FTA.
Being aware of pitfalls, operating within a controlled environment with strict control of excise declarations, and ensuring employees are appropriately trained up to speed with changes in practice and legislation cannot be overstated. These measures help mitigate the risk of errors in the excise tax compliance process.
Given the complexities of the excise tax process, taxpayers are likely to discover errors at some point, the most minor of which may have serious consequences. The key to mitigating sanctions, which could include interest, penalties, and/or prosecution, is to be efficient, take timely action and ensure full disclosure and cooperation when regularising matters.
Given the above, businesses are well advised to outsource their Excise Tax compliances to FTA-approved registered tax agents who ensure correct operations and compliance with all obligations. The tax agents at MBG Corporate Services have extensive experience in excise compliance reviews and excise tax health checks whereby we identify potential risks, help mitigate those risks and simultaneously identify opportunities to improve processes or recover additional refunds from the FTA. Our globally experienced team reviews the accuracy of your data and ensure compliance with excise tax laws-related statutory provisions and policies. Our comprehensive excise health checks ensure that you are fully prepared for Excise Tax audits.
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Vipin Kumar Ahuja is director — taxation at MBG Corporate Services
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