March 5 2020

Clarification on renewal of designated zone registrations – issued

Source: IBFD Tax Research Platform News

On 3 March 2020, the Federal Tax Authorities (FTA) issued clarification (EXTP005) on the renewal of designated zone registrations.

In accordance with provisions of article 15(3) of Cabinet Decision No. 37 of 2017 on the Executive Regulations of the Federal Decree-Law No. 7 on Excise Tax, a warehouse keeper must submit an application to the FTA in order to register each of the designated zones over which it is responsible.

The FTA requires the warehouse keeper to pay a registration fee in order to register the designated zone for a period of 12 months. Hence, the warehouse keeper should renew the registration for the designated zone in order to maintain its status.

The renewal form must be available to be filed 30 days before the expiry date of the designated zone registration. As part of the renewal process, the warehouse keeper will be required to provide the following:

Details relating to designated zone based on previous 12-month period

  • an estimate of the value of the annual throughput of excise goods entered into the designated zone (the total value of excise goods passing through the designated zone in a 12-month period); and
  • an estimate of the average value of excise goods held at month-end in the designated zone. This should be based on the average end of month stock value, calculated over a 12-month period to allow for seasonal variations.

Financial guarantee

The warehouse keeper should provide a financial guarantee which will be calculated by The FTA based on the aforementioned details. The new financial guarantee must be received by the FTA within 20 business days from the date requested.

Where the calculation indicates that the value should be less than the current guarantee, the warehouse keeper will be given the option of whether to arrange for a lower guarantee to be lodged or to maintain the current value.

Payment of renewal fee

The renewal fee for a designated zone is AED 2,000 payable no later than 20 business days of the expiry date of the current registration.

In the event where a warehouse keeper fails to pay the renewal fee within the allowed period, the designated zone will be treated as suspended for 20 business days, after which if no action is taken, it will be treated as 'expired'.