Understanding Persons Liable to Pay Tax in UAE

Excise Tax: Federal Decree-Law No. 7 of 2017 (Federal Decree-Law No. 19 of 2022) 
On November 6, 2023, the UAE Cabinet issued Decision No. 108 of 2023, which clarifies critical aspects of the Executive Regulation of the Federal Decree-Law No. 7 of 2017 concerning Excise Tax. This decision specifically addresses the obligations of various stakeholders in the supply chain regarding excise tax payments, highlighting the importance of compliance and record-keeping. 

Who is Liable for Excise Tax? 

Liability of the Supply Chain Actors

Under Article 2 of the Cabinet Decision, if the person who performed an activity specified in Article 4 of the Decree-Law has not met the tax payment requirements, several entities within the supply chain can become liable for the unpaid tax. These include: 

• Persons in the Supply Chain: Any individual or entity involved in the supply chain where excise tax has not been settled may be held responsible. 

• Investors and Financial Stakeholders: Anyone with a financial interest in the supply chain where the tax obligations have not been fulfilled could be liable. 

• Owners of Excise Goods: This includes parties who own excise goods in cases where they are not the producer, importer, warehouse keeper, or stockpiler. 

This broad definition emphasizes the need for vigilance among all participants in the supply chain, as liability can extend beyond the primary producers and importers. 

2. Responsibilities of the Warehouse Keeper 

The decision further stipulates the responsibilities of the Warehouse Keeper concerning the release of excise goods from a designated zone. If the liable party fails to pay the due tax, the Warehouse Keeper may be held accountable in specific situations, including: 

• Inadequate Record-Keeping: If the Warehouse Keeper fails to maintain the records required by Article 24 of the Decree-Law. 

• Failure to Comply with Conditions: Should the Warehouse Keeper neglect any conditions set by the Authority as per Clause 5 of Article 9 of the Cabinet Decision. 

• Benefiting from Tax Non-Payment: If the Warehouse Keeper gains any advantage from the failure of the liable person to pay the due tax. 

These provisions reinforce the necessity for thorough documentation and adherence to regulatory standards within the warehousing operations handling excise goods. 

3. Conditions for Stockpiler Exemption 

Interestingly, Article 2 also outlines specific conditions under which a Stockpiler may not be required to pay the due tax. These conditions are: 

• The Stockpiler must own excise goods that are available in free circulation and intended for conducting business in the UAE, ensuring that tax on these goods has not been previously paid, relieved, remitted, or deferred. 

• The stockpiled excise goods must not be deemed excess, as per Article 11 of the Cabinet Decision. 

This clause is particularly relevant for businesses engaged in the distribution of excise goods, as it provides a clear framework under which tax liabilities may be mitigated. 

Conclusion 

The issuance of Cabinet Decision No. 108 of 2023 marks a significant step in clarifying the responsibilities of various actors in the excise tax landscape within the UAE. Stakeholders must remain diligent in their compliance efforts to avoid potential liabilities associated with unpaid taxes. By understanding the nuances of these regulations, businesses can better navigate the complexities of excise tax obligations and ensure that they operate within the legal framework established by the UAE government. 

Summary

Cabinet Decision No. 108 of 2023, issued on November 6, provides critical updates to the Executive Regulation of the Federal Decree-Law No. 7 of 2017 on Excise Tax in the UAE. Article 2 outlines the entities responsible for paying tax when the primary liable person fails to meet their obligations. Key points include the liability of individuals within the supply chain, investors, and owners of excise goods. Warehouse keepers may also be held accountable under specific conditions, such as failing to maintain proper records or benefiting from non-compliance. Additionally, stockpilers are protected from tax liability if they own excise goods in free circulation and meet certain criteria. Businesses must understand these regulations to ensure compliance and avoid unexpected liabilities. 

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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