Sale of cigarettes not bearing Digital Tax Stamps prohibited in UAE

The Federal Tax Authority (FTA) announced that the sale and possession of all types of cigarettes not bearing the Digital Tax Stamps will be prohibited across UAE markets starting from Thursday, August 1, 2019.

The Authority explained that two types of Digital Tax Stamps were approved, the first of which is Red and meant to be placed on the packaging of tobacco products (including cigarettes) sold at all local markets, as well as at duty-free in arrival lounges. The second type, meanwhile, is Green and earmarked for tobacco products sold at duty-free in departure lounges.

Prohibiting the sale in local markets of cigarettes packets not bearing the Digital Tax Stamps is part of the timeline set for the ‘Marking Tobacco and Tobacco Products Scheme’, which went into effect at the beginning of 2019. The Scheme seeks to electronically track cigarettes packs from the production facility and until they reach the end-consumer, in order to protect consumers from low-quality products, combat tax evasion, and ensure that the Excise Tax due on these products has been settled, as per Cabinet Decision No. (42) of 2018 on Marking Tobacco and Tobacco Products and FTA Decision No. (3) of 2018 on Implementing the Marking Tobacco and Tobacco Products Scheme.

In a press statement issued today, the Authority called on all cigarette dealers and producers in the UAE to comply with these measures in order to avoid the penalties outlined in the Cabinet Decision on Violations of Procedures for Marking Tobacco and Tobacco Products.

The FTA also appealed to consumers to check for Digital Tax Stamps on the packaging of cigarettes they buy and inform competent authorities of any violations, noting that the Scheme serves to tighten controls on the market, ensure compliance with international best practices, verify that tax obligations have been met, and guarantee the quality and safety of tobacco products in the UAE.

FTA Director General Khalid Ali Al Bustani asserted that the Scheme is part of the Authority’s strategy to prevent tax evasion, protect consumer rights and preserve the environment using advanced, efficient, and accurate electronic control systems to support the implementation of the relevant legislation, which clearly outlined obligations for both the Authority and taxpayers, and set procedures to prevent the sale of harmful, lower-quality products.

“The Authority has sought to implement an integrated and widespread awareness campaign starting from the second quarter of 2018 – several months before the ‘Marking Tobacco and Tobacco Products Scheme’ went into effect – to allow sufficient time for local markets to prepare for the Scheme and avoid any adverse effects to their commercial activities,” H.E. Al Bustani explained. “Furthermore, the Authority collaborated with the system operator to carry out an extensive awareness campaign through its official website, social media accounts, newspapers, television, and radio. Workshops were organised, bringing together individuals and organisations involved in the manufacture and trade of tobacco and tobacco products, introducing them to the Scheme, and answering their queries.”

“The FTA Decision No. (3) of 2018 on Implementing the Marking Tobacco and Tobacco Products Scheme gave all individuals and entities concerned sufficient time to prepare for executing Cabinet Decision on Marking Tobacco and Tobacco Products, which was rolled out gradually over a long period of time,” H.E. Al Bustani added, noting that the Scheme will be gradually expanded to include all types of tobacco and tobacco products.

“The timeline for the Scheme allowed cigarette traders and producers sufficient time to prepare for the new system,” H.E. explained. “As of January 1st, De La Rue – the company commissioned by the FTA to operate the system in cooperation with the Authority – made the Digital Tax Stamps available for purchase on the Authority’s website. As of May 1, 2019, the import of any type of cigarettes into the UAE not bearing the Stamps has been prohibited; meanwhile, the sale of cigarettes packs not bearing the Stamps will be prohibited across UAE markets as of August 1, 2019.”

The Authority had organised a series of training workshops for inspectors at Departments of Economic Development and local Customs Departments across the UAE, exploring the ‘Objectives and Procedures for Implementing the Marking Tobacco and Tobacco Products Scheme’, the FTA Director General said, adding that the workshops were held in preparation for the inspection campaigns, conducted to ensure compliance with the ban on the sale of all types of cigarettes not bearing the Digital Tax Stamps in local markets, in an effort to prevent the sale of products that do not meet the necessary requirements or have not met their tax obligations.

Cabinet Decision on Marking Tobacco and Tobacco Products outlines the mechanism to place the Digital Tax Stamps to indicate that Excise Tax has been paid; tobacco manufacturers are required to place the Stamps on the products within the production facility immediately after packaging, if produced in the UAE, or prior to importing them if they are produced abroad. The FTA has determined a specific placement and method to apply the Stamps to each product.