FTA applies penalties for digital tax evasion on cigarettes

Nine types of violations will incur fines of Dh20,000 to more than Dh50,000

There are strict penalties in the UAE for retailers who do not comply with the minimum price set by the Federal Tax Authority. The National

Penalties for not implementing the new digital tax stamp scheme on tobacco products include fines of Dh20,000 to more than Dh50,000, the Federal Tax Authority said on Saturday.

A ban on the import of any type of cigarettes into the UAE not bearing the digital tax stamps came into effect on May 1. The sale, importation or production of tobacco products not bearing the digital tax marks will be prohibited in the UAE as of August.

The penalties have been set “in an effort to protect consumers, prevent contraband, low-quality products from entering local markets, and halt sales of smuggled goods in the UAE,” the FTA said in a statement.

There are nine possible violations. The strictest penalty of Dh50,000 and 50 per cent of the excise tax due applies in three instances: if a person possesses or handles products without a digital tax stamp, alters or prints over tax marks, or re-uses marks that had been previously been used.

If a person fails to securely store stamps as determined by the FTA or fails to comply with time limits for returning unused stamps to the authority, a Dh50,000 fine per incident is applicable.

Failure to affix the stamps in the manner and location specified by the authority incurs a fine of Dh25,000 on the first violation and Dh50,000 if it is repeated. The same penalties apply to a person who knowingly allows his premises to be used for the sale of unmarked goods.

If a person fails to report the movement of the designated excise good, the penalty is Dh20,000 each time the violation was committed. Finally, if a person conducts unauthorised trading, swapping, selling or otherwise supplying of digital tax stamps, there is a Dh25,000 fine for the first violation and Dh50,000 in case of repetition, in addition to 50 per cent of the tax amount.

The new penalties are part of the “Marking Tobacco and Tobacco Products” scheme, which went into effect on January 1 and allows for the electronic tracking of cigarette packs from production to end user.

The UAE introduced a 100 per cent excise tax on cigarettes, as well as 50 per cent tax on carbonated drinks and 100 per cent tax on energy drinks, in 2017.

Other GCC countries, including Saudi Arabia, Bahrain, Qatar and Oman have also introduced excise taxes in an effort to promote healthy living while boosting non-oil revenue.