Ensuring Compliance with FTA’s Updated Notification on Registered Prices for Excisable Goods

On October 17, 2024, the Federal Tax Authority (FTA) issued a crucial public notification regarding the updated registration of prices for excisable goods. This update, rooted in Cabinet Decision No. 52 of 2019, reflects the FTA’s commitment to maintaining transparency and accuracy in the excise pricing framework. It reminds taxpayers of their obligation to ensure that the registered prices of excisable products with the FTA reflect their current market values. Compliance with this regulation is essential for taxpayers to avoid penalties and demonstrate adherence to best practices in excise tax compliance.

A Closer Look at Article 14 of Cabinet Decision No. 52 of 2019

Article 14 outlines how the excise price for excisable goods is determined. This “designated sales price” is calculated as the higher of either:

1. The recommended selling price set by the importer or producer, or
2. The average retail selling price (ARSP) of the product, excluding VAT.

For the purpose of excise tax compliance, the “recommended selling price” is established by the product’s importer or producer, representing what they perceive as a fair price for their goods. However, for products registered some time ago, the designated sales price may need to be reviewed to accurately reflect current market values due to changing economic and market conditions.

This means that if the registered price of a product no longer mirrors its current market rate, it should be adjusted to avoid under- or over-reporting. The FTA requires this price adjustment, ensuring that the designated price is always the higher of the price affixed by the producer or the ARSP.

What is ARSP, and How is it Calculated?

The Average Retail Selling Price (ARSP) is essentially the typical price at which a product is sold across the market, adjusted for consistency. The FTA provides a systematic approach to ARSP calculation in Decision No. 1 of 2021, which involves the following key steps:

1. Gather Retail Selling Prices (RSPs): Collect the different RSPs for the product over the past 12 months, ideally from receipts from three major retailers or five other retailers over three distinct months.
2. Exclude VAT and Excise Tax: Adjust the RSPs to remove VAT and excise tax, arriving at a tax-exclusive RSP.
3. Calculate Market Revenue: Multiply the units sold at each store over the last 12 months to calculate total market revenue for each item.
4. Determine Average Retail Price: Divide the total market revenue by the total units sold across all recorded prices to get an average retail price.
5. Calculate Excise Tax: Apply the excise tax rate to the average retail price to determine the tax due on the product, resulting in the ARSP exclusive of VAT.

By adhering to these steps, taxpayers can determine an accurate ARSP, allowing them to make informed price adjustments for excise compliance.

Obligations for Registered Taxpayers

The FTA’s recent notification mandates all registrants, regardless of their registration type, to review and update the registered prices of their excisable goods. This ensures that every price registered reflects an accurate, fair market value, which aligns with the FTA’s commitment to transparency and accountability.

Additional Compliance Considerations

Alongside this update, there are further obligations and considerations to bear in mind:

• Single-Supplier Goods: If a product is sold exclusively by a single supplier, a letter from the supplier is required. This letter should confirm the exclusivity of the sale, provide price details, and include a statement that the items are exclusively sold by that retailer.
• Registration Type Changes: If a product’s registration type changes—for instance, from “Re-export” to “Sale in UAE”—the taxpayer must update the registration in BrandSync, FTA’s platform for managing product data. This update should be accompanied by a price amendment request to ensure accurate excise pricing.

Staying Compliant in a Dynamic Market

The FTA’s latest notification emphasizes the importance of aligning registered prices with real-time market values, reflecting both consumer demand and cost changes over time. Taxpayers are advised to regularly monitor these price changes, ensuring compliance with FTA’s regulations and enhancing market integrity.

Conclusion

The FTA’s directive on updating registered prices for excisable goods underlines the regulatory emphasis on accuracy and transparency in tax reporting. Taxpayers should take this opportunity to review their compliance strategies, update records as necessary, and consult the FTA’s Decision No. 1 of 2021 for guidance on calculating ARSP. By doing so, they can remain compliant with the FTA’s standards and contribute to a fair, transparent marketplace for excisable goods in the UAE.

summary

On October 17, 2024, the UAE’s Federal Tax Authority (FTA) issued a notification requiring taxpayers to update the registered prices of excisable goods to accurately reflect current market values. This aligns with Cabinet Decision No. 52 of 2019, which mandates that excise prices be based on either the producer’s recommended selling price or the average retail selling price (ARSP), whichever is higher. The ARSP calculation process, outlined in FTA Decision No. 1 of 2021, involves averaging recent retail prices and excluding VAT and excise tax. Registrants must review and adjust prices where necessary to maintain compliance. In cases of single-supplier goods, a validation letter from the supplier is required, and any registration type changes should be updated in BrandSync along with necessary price amendments.

Disclaimer: The Content offer general guidance and should not be considered legal, financial, or tax advice. Consult qualified professionals for personalized guidance. While efforts have been made to ensure accuracy, no guarantee is provided for completeness or applicability to individual situations. Users are responsible for their interpretation and actions based on this information, at their own risk.

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