FTA Decision No.6 of 2025

Standards, Controls and Procedures for Dealing with Shortage Within the Designated Zone due to the Natural Characteristics of Excise Goods

Effective 1 July 2025, the Federal Tax Authority (FTA) has introduced a pivotal regulation through Decision No. 6 of 2025, setting clear standards, controls, and procedures for addressing natural shortages of excise goods within designated zones in the UAE.

This marks a significant step forward in resolving a long-standing area of uncertainty for excise industries, providing a structured legal framework to deal with losses that occur naturally due to the inherent characteristics of excise goods.

The Decision formalizes how natural shortages – such as evaporation, leakage, or other unavoidable losses – should be measured, documented, and reported. This change impacts tobacco, shisha, beverage, and vape liquid industries, and will require businesses to reassess their operational, reporting, and compliance processes.

Why This Matters

Under the previous framework, the treatment of natural shortages was often unclear, leading to inconsistent practices and potential tax exposure. Now, with Decision No. 6 of 2025:

• Businesses have defined parameters for recognizing permissible natural shortages.
• Reporting must be supported by independent laboratory verification and comprehensive documentation.
• The FTA has established clear oversight procedures to ensure compliance.

Key Highlights of the Decision

• Clear Definitions – Including what constitutes a Natural Shortage and the role of an Independent Competent Entity.
• Mandatory Independent Reports – Businesses must obtain an annual report from an approved entity detailing permissible shortage percentages.
• Strict Documentation Standards – Including manufacturing process descriptions, equipment specifications, historical data, and production formulas.
• Ongoing Compliance Requirements – Reports must be updated annually or whenever production or storage conditions change.
• Industry-Specific Implications – Tailored requirements for cigarette manufacturing, shisha production, beverage bottling, and vape liquid filling.

Industry Implications at a Glance

• Cigarette Industry – Moisture loss and production waste must now be measured and validated at each production stage.
• Shisha Industry – Precise documentation of moisture-related weight differences and flushed waste is mandatory.
• Beverage & Vape Liquid Industry – Real-time tracking of spillage, flush loss, and disposal is required, supported by production and storage SOPs.

Preparing Your Business for Compliance

With the Decision coming into force on 1 July 2025, excise businesses should act now to:

1. Review current processes for tracking and reporting shortages.
2. Engage with an Independent Competent Entity for initial inspections and reporting.
3. Develop or update Standard Operating Procedures (SOPs) to align with FTA requirements.
4. Ensure all historical data and documentation are complete and accurate.
5. Train relevant teams on the new compliance and reporting process.

Download the full article here to ensure your business is ready to meet the new compliance standards and avoid unnecessary tax liabilities.