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VAT Value Added Tax - Presentation on Key Concepts and Knowledge
UAECA, FCCA, CIA, M.Com, Bsc (Hons.)
Managing Partner at Push Digits Chartered Accountants
What is Excise Tax?
Excise tax was introduced in the UAE in the year 2017 and became effective from October 1. Excise tax can simply be defined as an indirect tax charged on specific products which are considered to be damaging with regards to environment or human health. The goods or products on which excise tax is charged are called excise goods.
The said law is applicable to products such as Energy Drinks & Tobacco at the rate of 100 per cent & for Carbonated Drinks at the rate of 50 per cent.
Excise Tax Audit
It is a process as per which a registered taxable entity’s liability pertaining to excise tax is verified for a specified tax period. The purpose of the process of excise tax audit is to ensure whether the reported excise tax liability is correct and submitted to the tax authority within the date specified by the authority.
Scope of Excise Tax Audit in the UAE
The Federal Tax Authority (FTA) is entitled to conduct tax audit of a taxable person whenever it feels necessary. The audit can either be performed at the registered office of the taxable entity or the registered person can be called by the FTA to its offices for audit proceedings.
FTA is handed with the responsibility of determining which entities should be audited and at what time. In other words, the right to audit a registered person with regards to Excise tax or a person ought to be registered but not yet registered with Excise tax is with the FTA. The decision to select entities to be audited by the auditor is based on the level of risk assessed by the authority with regards to error or tax fraud.
How Excise Tax Audit is performed?
During the course of a Tax Audit, the auditor verifies all the premises, inventories, records of the taxable person etc., to assess the exact position of the taxable entity and to ensure whether the entity is in compliance with the Excise Tax laws in the UAE. The Auditor is entitled to take samples of original documents or copies of it as supporting evidence. The auditors can also take a sample of entity’s products for further review or as evidence.
The auditor is also entitled to communicate and interact with entity’s staff members working in various departments like procurement, accounts, warehouse, logistics, etc., to understand and assess the nature of business and to confirm specific transactions.
What a taxable person needs in case of an Excise Tax Audit?
A registered taxable entity subject to Excise Tax Audit must cooperate with the auditor and provide him with full support during the tax audit. If the taxable entity has a legal agent or/ and tax consultant then in that case they are also required to fully cooperate with the auditor. The taxable entity/ person must follow the following instructions to aid the auditor with reference to the Tax Audit:
• The auditor must be permitted to enter the taxable person’s registered office(s)
• The auditor must have access to all documents and records considered necessary for audit of entity’s excise tax liability
• Persons responsible for performing activities related to excise tax must be available to the auditor for enquiry during the process of tax audit.
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HOW PUSH DIGITS CAN HELP YOU
We are a Group of reputed audit, accountancy and tax consultancy firms operating in the UAE with our Audit Firm Nadeem and Umendra Chartered Accountants being an approved Audit Firm by Authorities of UAE. Our team of audit and tax professionals will help you in making sure that you are well prepared with regards to an Excise Tax Audit.
• Our approach would first include the verification of all the documents relating to excise goods and assessment of whether the documents maintained are in compliance with the requirements of the UAE tax laws.
• Our tax professionals will check the tax calculated by the taxable entity/ person and make sure that the tax calculated is accurate.
• We will perform a stock count on a particular date to verify the physical inventory kept and maintained by the taxable person/ entity and quantify exceptions if found during the physical verification.
• Our team would provide training to the staff members of the taxable person with reference to a tax audit so that they are prepared in case of a tax audit in the future.
Records to be maintained as per Excise Tax Law in the UAE
A registered taxable entity/ person is required to keep and maintain the following documents as per excise law in the UAE:
• Records and supporting documents of all imported, produced or stockpiled Excise products/ goods.
• Evidence of excise products sold outside the UAE.
• Supporting documents of excise goods exported outside the UAE.
• Detailed record of physical inventory held by the taxable person.
• Record of excise goods that either got lost or destroyed.
• Tax record with regards to tax due on excise goods imported by the taxable person in the UAE.
• Tax record with regards to tax due on excise goods manufactured by the taxable person in the UAE.
• Tax record with regards to tax due on excise goods that have been purchased or produced for the purpose of stockpiling.
• Evidence of tax deducted either in case of tax paid and submitted on excise goods sold outside the UAE or tax paid and submitted on excise product that is an integral component of another excise product on which is also subject to excise tax.
Reports required by the Tax Authority
The auditor or FTA may require the taxable person to submit the following reports:
• Report containing item wise details of excise goods physically kept by the taxable person in the context of value and quantity.
• Report providing information relating to average monthly inventory held by the taxable person.
• Report providing information relating to average monthly sale for each excise item.
• Report containing details with regards to excise products manufactured by the taxable person.
• Report containing details with regards to excise products purchased from outside the UAE (Import) by the taxable person.
• All the above mentioned reports for a one-year period prior to Excise Tax implementation.
The FTA may also require the following reports/ information from any taxable person registered for Excise tax in the UAE subsequent October 1, 2017 for the purpose of tax audit:
• Item wise detail of Excise items produced by the taxable person.
• Item wise detail of Excise items imported by the taxable person.
• Item wise detail of Excise items sold locally by the taxable person.
• Item wise detail of Excise items sold outside the UAE (Export) by the taxable person.
• Item wise detail of Excise items released from the specified designated zone.
• Detail containing name of companies to which the excise products are sold by the taxable person.
• Detail containing name of retailers to which the excise products are sold by the taxable person.
Rights of a Tax Auditor during the Course of a tax audit
The auditor is entitled to require the following from the taxable person:
• Original documents such as invoices, tax calculation, etc.
• Copies of documents and supporting evidences.
• Sample goods for review purpose.
Rights of a taxable entity during a Tax Audit relating to Excise Liability in the UAE
During the proceedings of Tax Audit, the taxable person has the right to monitor while the documents are being removed by auditor. If the auditor removes any document or record during the proceedings of Tax Audit, the taxable person is entitled to get back the records or documents removed by the auditor once the tax assessment is finished. The taxable entity also has the right to demand and obtain receipt from the auditor against the removal of any record or document.
HOW WE CAN HELP WITH YOUR COMPANY’S EXCISE TAX CONSULTANCY AND AUDIT
Our experienced Tax Consultancy Team and Audit Team is available at a call or email to serve you with our Professional Excise Tax Consultancy and Audit Services. Contact our Experienced Partner today at +971503958931 / [email protected] for a consultation meeting.