UAE FTA Clarifies Excise Tax Treatment for
Natural Shortage of Goods

The UAE Federal Tax Authority (FTA) has issued Public Clarification EXTP014, providing detailed guidance on the treatment of “Natural Shortage” of excise goods held within Designated Zones (DZs). Effective from July 1, 2025, the update clarifies that certain losses due to the inherent nature of the goods will not be classified as a release for consumption, thus avoiding excise tax.

Distinction Between Natural and Avoidable LossUnder the new clarification, shortages resulting from theft, negligence, or operational inefficiency are still considered a release for consumption and remain subject to excise tax. In contrast, natural shortages are exempt, provided they occur under specific controlled procedures.

Compliance Procedures for Taxable PersonsTo qualify for the exemption, warehouse keepers or taxable persons must follow a structured verification process:

• Independent Certification: Applicants must request a report from an FTA-approved laboratory to determine the permissible percentage of natural shortage for their specific goods.
• Validity Period: The issued report is valid for one year from the date of issuance.
• Mandatory Reporting: Taxable persons must notify the FTA of the actual natural shortage by submitting a declaration via the EmaraTax platform.

The FTA emphasizes that the declared shortage must not exceed the percentage stipulated in the independent report to maintain its tax-exempt status.