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Digital Tax Stamp (DTS) Legislative Regime in the UAE

August 4, 2023

Ever since October 1, 2017, the United Arab Emirates (UAE) has introduced a dynamic change in its taxation system by instigating an Excise Tax on certain goods, levying rates as steep as 50% and 100%. This starkly contrasts with the Value-Added Tax that is accrued on all transactions involving goods or services. The Excise Tax, however, is a singular charge applied at the moment of production, import, stockpile, or release of specific goods from an Excise Tax Designated Zone.

Outstripping the nominal 5% Value-Added Tax and the 9% Corporate Tax, Excise Tax is levied at considerably higher rates. 

To fortify this newly introduced taxation system, the UAE has inaugurated a Digital Tax Stamp (DTS) system. The DTS system employs ‘stamps’ to mark certain categories of excise goods, signifying the payment of Excise Tax on these products. The prime objective of the DTS system is to bolster the UAE’s Federal Tax Authority (FTA) with an efficient mechanism to supervise and track these marked goods, thereby assuring full tax compliance.

This article aspires to illuminate the complex legislative framework that underpins the DTS system in the UAE, easing access to the relevant governing rules and regulations.

DTS Legislations on an International Level

The DTS scheme finds its roots in the Common Excise Tax Agreement of the States of the Gulf Cooperation Council. According to Article 18 of the Agreement, “The [Financial and Economic Cooperation Committee of the GCC] shall determine the Excise Goods upon which special marks/stamps shall be placed, and the rules necessary for that purpose in the GCC Territory”. 

From that point onward, the UAE incorporated the DTS scheme into its Excise Tax legislation.

DTS Legislations on a Domestic Level

Based on the powers granted to it under its law of establishment, the FTA has issued the following publications in relation to the DTS scheme:

Article 24(2) of the Excise Tax Decree-Law states that “The Council of Ministers shall specify, at the suggestion of the Minister, the Excise Goods that should be marked to indicate that Tax has been paid on them as well as the relevant conditions and procedures”.

DTS Publications by the FTA

Based on the powers granted to it under its law of establishment, the FTA has issued the following publications in relation to the DTS scheme:

Conclusion

The UAE’s adoption of the Digital Tax Stamp (DTS) system signifies a substantial transformation in its approach towards excise taxation, reflecting both international and domestic legislative instruments. Anchored initially in the Common Excise Tax Agreement of the GCC, the DTS scheme has been effectively integrated into the UAE’s Excise Tax legislation and currently regulates a wide spectrum of excise goods. The robust legislative framework, ranging from Federal Decree-Laws to Cabinet Decisions and FTA Decisions, ensures stringent and efficient enforcement of the DTS system. The guidance provided by the FTA through its various publications further clarifies the intricate scenarios and processes related to the DTS system. As we move forward, it will be crucial to monitor how this system evolves and influences the landscape of taxation in the UAE, particularly as it relates to the management and control of excise goods.

This Article is prepared by Mohamed El Baghdady, Head of Tax and Financial Crimes, and Marwan Alnooryani, Senior Tax Associate, at Habib Al Mulla & Partners Law Firm.

Seek Legal Counsel

Our expertise in tax law and regulations allows us to provide clients with effective and accurate tax advice, taking into consideration their unique circumstances and needs. Additionally, our experience and knowledge in handling tax disputes enable us to represent clients in discussions with tax authorities, as well as in court proceedings. 

Our track record of successfully resolving tax disputes and helping clients minimize their tax liabilities has likely earned us a reputation as a trusted and reliable tax advisor. Our tax and financial crimes team, led by our Head of Tax and Financial Crimes, Mohamed El Baghdady, has successfully advised and represented clients across various industries, including, but not limited to, consumer goods and retail, services, real estate, oil & gas and banking and finance, before the government authorities, tax tribunals and courts. Our clients have been successful in multiple tax disputes before the committees and courts.For further information, please contact, Mohamed El Baghdady, Head of Tax and Financial Crimes, on mohamed.elbaghdady@habibalmulla.com or any of the members of our team.

Contacts

Mohamed El Khatib

Principal Partner – Head of Disputes
mohamed.elKhatib@habibalmulla.com

Mohamed ElBaghdady

Senior Associate
mohamed.elbaghdady@habibalmulla.com

Marwan Alnooryani

Senior Associate
marwan.alnooryani@habibalmulla.com

Basem Ehab

Associate
basem.ehab@habibalmulla.com

Kholoud Hafez

Associate
kholoud.hafez@habibalmulla.com

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