A New Step in Excise Tax System: Digital Tax Stamp Scheme

The Federal Tax Authority (FTA) of the UAE had announced that from 1 August 2019 onwards, the sale or possession of any kind of cigarettes which do not bear the Digital Tax Stamp (DTS) will be banned in the UAE market.

The Digital Tax Stamp is in news again as the FTA has banned the sale (supply), transport, storage or possession of water pipe tobacco products and electrically heated cigarettes that are not marked with Digital Tax Stamps with effect from 1st January 2021.

The initiative of banning the import of waterpipe tobacco not marked with digital tax stamp is in line with the second phase of FTA’s Tobacco Products Scheme. The main aim of the DTS system is to combat commercial fraud and tax evasion.

Visit the site tax.gov.ae/dts

Introduction to the Digital Tax Stamp Scheme

The Digital Tax Stamp Scheme or the DTS is a tax managing scheme introduced by the FTA by which the tobacco manufacturers and stakeholders are to comply with certain improved standards while importing and selling tobacco in the UAE market. As per this scheme, all tobacco manufacturers should use specific high-security control stamps and codes on all packs.

In line with the new excise tax system, the FTA has developed special mechanisms to ensure that the tobacco products in circulation bear the Digital Tax Stamps. All tobacco manufacturers must mandatorily mark their products with the Digital Tax Stamp at the production facility after the packaging, if the production is done locally. The stamp must be put before importing if the products are imported.

The digital stamps will be placed on the packages of tobacco products and registered in the FTA database and the data that can be read with a special device to make sure all taxes due on these products have been paid. Using the device, the inspectors of the Departments of the Economic Development and Customs employees can ensure that all the pending taxes have been settled.

FTA’s ‘Marking Tobacco and Tobacco Products Scheme’ is a new milestone in the excise tax system in the UAE. With the new tax managing program, the FTA is hoping to achieve the following goals:

  • The scheme intends to safeguard the consumers from commercial fraud and low-quality products.
  • It will enable the FTA to tackle tax evasion in an efficient manner.
  • It empowers the FTA to collect and control taxes on all imported or locally manufactured tobacco products sold in the UAE market.
  • The scheme allows the FTA to monitor and curb the sale of illicit products in the market as relevant authorities are entrusted with analyzing and auditing the supply chain.
The Federal Tax Authority of the UAE has made the following clarification for the Duty-Free products:
  • The Digital Tax Stamp is mandatory for all Duty-Free products in the UAE.
  • All the inland and inbound duty-free products should carry the Red Digital Tax Stamp.
  • All outbound duty-free products should carry a Green Digital Tax Stamp.

The following industries need to register for DTS scheme:

  • A UAE based or international cigarette producer who imports products into the UAE for domestic sale or for duty-free outlets like airports and ports.
  • An officially licensed importer who will purchase cigarette products in bulk from an international or domestic producer to sell or distribute in the UAE market or duty-free outlets.
  • A distributor or supply chain agent or warehouse keeper who receives the imported goods for sale in the UAE market or duty-free outlet.

How to order for the Digital Tax Stamps:

  • Download the required form from the site tax.gov.ae/dts and complete the required data.
  • Send the request to ftadtscustomercare@delarue.com to receive a username and password to log in to the DLR system.
  • Click on the box “Manage Orders” and record the basic information related to the order and the target market, whether UAE or Duty-Free.

For further questions or inquiries, please email: ftadtscustomercare@delarue.com

Penalties for failing to comply with the Digital Tax Stamp System

In accordance with the FTA decision no. 33 of 2019 on violations of procedures to mark designated excise goods, penalties will be levied on those who fail to comply with the Digital Tax on the packaging of tobacco products.

Some of the penalties on violation of Digital Tax Stamps regulation are as follow:

  • A penalty of AED 50,000 plus 50% of the amount of excise tax due, will be collected from a person possessing or supplying unmarked designated excise goods.
  • A penalty of AED 25,000 to AED 50,000 will be slapped on those people who allow the sale of unmarked designated excise goods in their facilities. It will be AED 25,000 for the first instance of violation and 50,000 for repeated violations.
  • A penalty of AED 50,000 plus 50% of the amount of excise tax due will be levied if a person modifies or prints over Digital Tax Stamps fixed on designated excise goods.
  • In the event of failing to inform a transfer of designated excise goods, a penalty of AED 20,000 is levied for each time the breach is committed.