Excise Tax Violations and Penalties: Insights from the UAE law

The landscape of tax compliance in the United Arab Emirates (UAE) has undergone significant transformations since the introduction of Excise Tax through Federal Decree-Law No. 7 of 2017 and its amendments via Federal Decree-Law No. 19 of 2022. Among the critical aspects of these laws are the provisions related to violations and penalties, which are clearly outlined in Chapter Nine of the legislation. This article delves into the specific articles addressing administrative penalties and tax evasion, emphasizing the importance of compliance for businesses engaged in the production, importation, and sale of excise goods. 

Administrative Penalties Assessment (Article 22) 

Article 22 of the Excise Tax legislation stipulates that the relevant authority will issue an Administrative Penalty Assessment, notwithstanding the provisions of tax procedures law, to any taxable person found in violation of specific provisions. The notification of such penalties shall occur within five business days from the date of issuance. The following violations are explicitly outlined: 

1. Failure to Display Inclusive Prices: Taxable persons are required to display prices that include the applicable excise tax (considering along with the provisions as per Executive regualtion). Non-compliance with this provision undermines transparency and can mislead consumers. 
2. Improper Transfer Procedures: The transfer of excise goods between designated zones must adhere to specific conditions and procedures. Violations in this area indicate a lack of adherence to the regulatory framework, which is designed to ensure proper tax collection. 
3. Failure to Provide Price Lists: Taxable persons must supply the authority with accurate price lists of excise goods they produce, import, or sell. This provision is critical for maintaining an accurate tax base and ensuring that due taxes are appropriately assessed. 

These administrative penalties serve as a mechanism to ensure compliance and uphold the integrity of the tax system. Businesses must remain vigilant in adhering to these regulations to avoid financial penalties and reputational damage. 

Instances of Tax Evasion (Article 23) 

Article 23 highlights various actions that constitute tax evasion, which are subject to severe penalties under the Tax Procedures Law. Noteworthy instances include: 

1. Unauthorized Movement of Excise Goods: Bringing or attempting to bring excise goods into or out of the UAE without paying the relevant due tax—either in part or in full—constitutes a serious violation. 
2. Intent to Evade Tax Settlement: Engaging in activities related to the production, transfer, acquisition, storage, transportation, or receipt of excise goods without the payment of due tax demonstrates an intention to evade tax obligations. 
3. False Distinguishing Marks: Placing counterfeit or misleading markings on excise goods with the intent to evade tax settlement or obtain unlawful refunds is a clear violation of the law. 
4. Submission of Fraudulent Documentation: Providing false, counterfeit, or unreal documents, returns, or records to evade tax responsibilities can lead to severe penalties and legal repercussions. 

These provisions are crucial for maintaining a fair tax system, ensuring that all taxable entities contribute their fair share to the economy. The stringent penalties associated with tax evasion underscore the government’s commitment to combatting tax fraud and promoting compliance. 

Conclusion 

The regulations surrounding Excise Tax in the UAE reflect a robust framework aimed at ensuring compliance and mitigating tax evasion. Articles 22 and 23 serve as vital components of this framework, delineating clear expectations for taxable persons and outlining the consequences of violations. Businesses operating in this environment must prioritize compliance by understanding their obligations under these laws, fostering a culture of transparency, and implementing robust compliance mechanisms. By doing so, they not only avoid penalties but also contribute to the integrity and sustainability of the UAE’s tax system. 

Summary

This article discusses the key provisions of the UAE’s Excise Tax laws, specifically Federal Decree-Law No. 7 of 2017 and Federal Decree-Law No. 19 of 2022, focusing on Chapter Nine regarding violations and penalties. It outlines Article 22, which establishes Administrative Penalty Assessments for taxable persons who fail to comply with price display regulations, transfer procedures for excise goods, and submission of price lists. Additionally, Article 23 addresses instances of Tax Evasion, identifying actions such as unauthorized movement of excise goods, placing false markings, and submitting fraudulent documents. These regulations underscore the importance of compliance for businesses to avoid penalties and contribute to the integrity of the UAE’s tax system. 

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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