Regulatory & Legal Updates

Federal Tax Authority Decision No. 6 of 2025 – Standards, Controls, and Procedures for Dealing with Shortage in Excise Goods

Effective Date:
1 July 2025

Details:

• This Decision establishes clear standards, controls, and procedures for handling shortages of Excise Goods within Designated Zones attributable to the natural characteristics of such goods.
• The framework formalises prior practices, introducing structured requirements for assessing and reporting permissible shortages.

Key Provisions:

• Definition of Natural Shortage: Shortage occurring during production, storage, or transportation within the Designated Zone due to the inherent nature of the goods, beyond the Taxable Person’s control.
• Independent Competent Entity: Approved laboratories that assess and certify the permissible percentage of natural shortages.
• Permissible Shortage Assessment: Warehouse Keepers and Taxable Persons must request an inspection and certification by the Independent Competent Entity, supported by at least 6 months of historical data (unless newly established).
• Validity and Renewal: The Report on permissible shortage is valid for 12 months, after which a new assessment is required.
• Unannounced Inspections: The FTA, in coordination with the Independent Competent Entity, may conduct surprise audits to verify declared shortages.

Documentation Requirements:

• Detailed manufacturing process explanations.
• Production formulas outlining expected shortages.
• Historical supporting data.
• Equipment manuals.
• Reports issued by the Independent Competent Entity.

Impact:

• The decision introduces rigour and formal oversight in the treatment of excise goods shortages, reducing the potential for abuse and ensuring uniformity in application.

Compliance Tips:

• Engage an approved Independent Competent Entity for periodic assessments.
• Keep comprehensive records to substantiate any declared shortages.
• Monitor operational changes that could affect the permissible shortage percentage and report within 20 business days.

Applicability:

• All Warehouse Keepers and Taxable Persons subject to Excise Tax operating within Designated Zones.

Federal Decree-Law No. 28 of 2022 on Tax Procedures (Amended as of 30 September 2024)

Effective Dates of Amendments:
30 October 2024

Summary of Key Amendments Compared to Previous Version

Electronic Invoicing System (Article 4 bis):

• Introduced formal authority for the Minister to implement the Electronic Invoicing System, with binding compliance obligations for designated persons.

Language Requirements (Article 5):

• Reinforces that tax submissions must be in Arabic, with translated versions permitted subject to accuracy obligations.

Expanded Tax Audit Powers (Articles 16-22):

• Enables the FTA to conduct audits without prior notice under specific circumstances (e.g., suspected tax evasion).
• Allows temporary closures of business premises for up to 72 hours with proper authorisation.
• Defines taxpayer rights during audits (e.g., to request identification and audit notification copies).

Voluntary Disclosures (Article 10):

• Clarified processes for correcting errors in tax returns, tax assessments, and refund applications.

Enforcement and Penalties:

• Expanded provisions on tax assessments, administrative penalties, and the FTA’s authority to collect and enforce tax obligations.

Impact:

• These amendments significantly enhance tax compliance infrastructure, particularly through the imminent introduction of electronic invoicing and broader audit capabilities.

Compliance Tips:

• Prepare for the implementation of the Electronic Invoicing System by upgrading invoicing systems.
• Ensure timely voluntary disclosures to minimise penalties.
• Maintain readiness for audits, including unscheduled inspections.

Applicability:

• All Taxable Persons and Registrants under UAE tax laws, including VAT and Corporate Tax.

Federal Decree-Law No. 8 of 2017 on VAT (Amended up to 30 September 2024)

Effective Date of Latest Amendments:
30 October 2024

Key Updates:

• Electronic Invoicing System: Inclusion of formal definitions for Electronic Invoice, Electronic Credit Note, and the Electronic Invoicing System aligned with the Tax Procedures Law.
• Expanded Definitions and Registration Thresholds: Clarifications on Non-Resident definitions and updates to Tax Group registration provisions.
• Tax Group Provisions (Article 14): The FTA has the authority to assess and enforce Tax Group registrations where economic, financial, and regulatory links exist among Related Parties.
• Zero-Rated Registration Exceptions (Article 15): Taxpayers making only zero-rated supplies may apply for exemption from VAT registration, subject to notification obligations if circumstances change.

Impact:

• These changes align the VAT regime with broader digitalisation efforts, notably in electronic invoicing, and introduce mechanisms to prevent under-registration within corporate groups.

Compliance Tips:

• Ensure readiness for e-invoicing mandates.
• Review related party structures to assess Tax Group registration requirements.
• Monitor supplies to verify eligibility for VAT registration exceptions.

Applicability:

All VAT-registered businesses and persons potentially meeting registration thresholds under the UAE VAT regime.