The UAE FTA has issued EXTP014, updating rules on Natural Shortage of excise goods. It sets conditions, reporting, and declaration procedures for tax exemption in Designated Zones.
The UAE Federal Tax Authority (FTA) has issued Excise Tax Public Clarification EXTP014, updating and replacing EXTP011, to clarify the treatment of Natural Shortage of excise goods within Designated Zones (DZs). The clarification defines circumstances under which a shortage of excise goods is not considered a “release for consumption” and is therefore exempt from Excise Tax.
Definition and scope
Under normal circumstances, excise goods found deficient within a DZ or during transfers between DZs are treated as released into free circulation and subject to tax. EXTP014 introduces an exception for Natural Shortage, which refers to losses resulting from the natural characteristics of the goods, such as evaporation or moisture loss, during production, storage, or transport within a DZ.
To qualify as a Natural Shortage, the loss must:
- Be beyond the control of the Relevant Person;
- Not result from negligence, theft, or operational inefficiencies;
- Be significant enough to make it impossible to release the missing goods for consumption.
Independent competent entity assessment
Warehouse Keepers or Taxable Persons (the “Relevant Person”) must obtain a Report from an Independent Competent Entity, such as FTA-approved laboratories, to determine the permissible percentage of Natural Shortage. The entity reviews at least six months of actual data or, for new operations, conducts inspections and uses available information. The Report is valid for one year.
Notification and declaration
Once obtained, the Relevant Person must notify the FTA of the actual shortage via the EmaraTax platform. Declared losses cannot exceed the percentage approved in the Report. Any excess is treated as a release for consumption, making Excise Tax payable. Declarations can cover multiple tax periods, up to one year, and do not require prior FTA approval.
Renewal and operational changes
If operational changes affect shortage levels, the Relevant Person must request a new Report within 20 business days. Renewal applications must be submitted at least 30 business days before the current report expires; delays may result in tax liability for shortages occurring during the gap.
Record-keeping requirements
Relevant Persons must maintain detailed documentation, including production formulas, equipment manuals, and the Independent Competent Entity’s Report. Relief is available only to taxpayers operating within DZs.
Transitional provisions
Reports issued within 12 months from 1 July 2025 are valid until 30 June 2027, provided the application is submitted by 31 March 2026.
