News developments
UAE: FTA Issues New Excise Tax Framework for Natural Shortages in Designated Zones
Alvarez and marsal, 26 June 2025: The UAE Federal Tax Authority (FTA) issued Decision No. 6/2025, effective from 1 July 2025, introducing a structured framework for the reporting and management of natural shortages of excise goods within Designated Zones, in line with international tax standards.
FTA has established a detailed framework for managing the natural shortages of excise goods—those occurring due to uncontrollable factors during production, transportation, or storage. The regulation will require businesses to seek pre-approval from the FTA for any natural shortages within a permissible threshold. This threshold must be corroborated by an FTA-approved Independent Competent Entity (ICE), which will conduct assessments of production processes and storage facilities and issue a report that will be valid for up to a year, confirming allowable shortages. When significant changes occur that might affect loss ratios, prompt notification to the ICE will be mandatory.
The new procedural requirements come with rigorous documentation and reporting duties, and businesses will need to maintain comprehensive audit-ready documentation, supported by ICE findings. This includes real-time traceability of excise goods and full compliance with potential FTA inspections. Non-compliance will lead to a risk of excise tax relief being denied and potential penalties.
This decision replaces previous natural shortage procedures, changing the approach from discretion by the FTA to a more systematic approach with obligatory third-party assessments and set deadlines. It will specifically target natural shortages, with other loss types like theft or operational errors remaining under separate guidelines, such as EXTP007.
Businesses affected by these changes should submit pre-approval requests to the FTA, ensure alignment with ICE standards, and update their internal processes accordingly. They should also revisit previous shortage claims to ensure compliance with the newly established criteria.
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