Federal Tax Authority Announces Completion of Preparations to Implement the ‘Marking Tobacco and Tobacco Products’ Scheme

The Federal Tax Authority (FTA) has announced the completion of all preparations required to implement its ‘Marking Tobacco and Tobacco Products’ scheme.

Entering into effect on Tuesday, January 1, 2019, the scheme involves the electronic monitoring of all types of imported, produced and locally-traded cigarettes, from production to consumer, to ensure full compliance with payment of excise tax. It will be gradually extended to cover all tobacco products.

In a press statement issued today, the FTA stressed the need for tobacco suppliers to comply with the regulations to avoid being penalised and prevented from practicing their duties until they comply fully with the system, which supports inspection and control at customs outlets and markets to prevent the sale of contraband products and that have not met their due tax.

The monitoring of the tobacco products will be facilitated by a stamp (digital seal) which will be installed on their packaging and registered in the FTA database. This stamp will include electronically-recorded information that can be read by a special device through which the payment of the tax on these products is verified.

H.E. Khalid Ali Al Bustani, Director General of the FTA, said that as of January 1, 2019, the marking will be issued for purchase orders by manufacturersand importers of all types of cigarettes. They will be required to apply for the digital stamps from the operator of the scheme (as approved by the authority) for installation on the tobacco packaging before the products leave the factory to ensure the payment of excise tax on tobacco products sold throughout the UAE.

The Director General pointed out that as of May 1, 2019 the import of all kinds of cigarettes to the country without the digital stamps will be banned. From August 1, 2019, all types of cigarettes that do not carry the stamp will not be allowed to be sold or traded in the UAE, with retail stores banned from selling cigarettes that do not have the digital stamps. H.E. explained that  according to the Cabinet Decision No. 42 of 2018 on Marking Tobacco and Tobacco Products, a penalty will be levied on any person who trades or carries specified excise products that are not marked with a digital seal,

"This step comes in implementation of the authority decision No. (3) for the year 2018 and the timetable set by the Federal Tax Authority in coordination with the global company implementing the system,” His Excellency explained.

“The UAE is the first country in the region to use such a system, which employs sophisticated methods to promote accuracy and effectiveness. It supports the FTA’s efforts to collect taxes in conjunction with the concerned authorities, implements uniform procedures that guarantee the rights and duties of taxable persons, promotes competitiveness and provides the highest levels of transparency. This system is an innovative solution to support and increase the efficiency of inspections and control at customs outlets and markets and prevents the sale of non-compliant products. The digital stamps that will be installed on the packaging of tobacco products include accurate electronic information that can be read by a special device, through which the payment of the tax on these products is verified,” His Excellency continued.

“The authority is keen to ensure  full participation of all stakeholders in the public and private sectors to discuss the new regulations. In this context, several meetings have been held recently with representatives of tobacco companies and traders and the company implementing the Marking Tobacco and Tobacco Products scheme to review the work plan and its requirements. Ongoing communication with the companies concerned is being conducted to harmonise systems, coordinate activities and meet the requirements of all parties involved to ensure the successful and efficient application of the system,” His Excellency added.

"The authority has completed its preparations to implement the new system in accordance with the best international standards and in coordination with customs departments, economic development departments, producers and importers of cigarettes and tobacco products.

Addressing how to apply for digital stamps, , the FTA said that the manufacturer or supplier needs to download the application form from: tax.gov.ae/digitaltaxstamp  and complete the required data. They are then required to send the request to [email protected] to receive a user name and password. The manufacturer or importer then needs to access the (DLR) system with the user name and password. The final step is to go to the ‘Manage Orders’ section where the digital stamp applicant will be able to record basic information to complete the application.

The FTA pointed out that inquiries relating to the Marking Tobacco and Tobacco Products scheme can be answered by contacting the customer service team via e-mail at: [email protected].

 The Cabinet Decision No. 42 of 2018 established a marking mechanism to indicate that the excise tax has been paid for such goods, provided that the producer complies with the fixing of the markings on such specified excise goods if produced in the UAE, or before importation if produced outside the country  in the manner and in the place determined by the FTA for each product.