# Public Clarification EXTP014 - Natural Shortage of Excise Goods - Source page: https://solvefortax.com/legislation/307 - Topic: Excise - Type: Public Clarification - Status: Active - Chapter: VI. Anti-Abuse and Compliance Measures - Issued: March 1, 2026 - Effective: 1 July 2025, implementing FTA Decision No. 6 of 2025 as amended by FTA Decision No. 1 of 2026 effective 27 January 2026 - Official PDF: https://solvefortax.com/api/pdfs/EXTP014-Natural-Losses-in-Excise-Goods-03-2026.pdf - Publisher: Solve for Tax, UAE Tax Law Library (https://solvefortax.com/) ## Summary This Public Clarification replaces Public Clarification EXTP011 and outlines the situations under which Natural Shortage of Excise Goods within a Designated Zone will not be considered a release for consumption, effective from 1 July 2025. It implements FTA Decision No. 6 of 2025 on the Standards, Controls and Procedures for Dealing with Shortage Within the Designated Zone due to the Natural Characteristics of Excise Goods, as amended by FTA Decision No. 1 of 2026 effective 27 January 2026. The clarification establishes procedures whereby Warehouse Keepers or Taxable Persons may submit requests to FTA-approved Independent Competent Entities (laboratories) to determine the permissible percentage of Natural Shortage for their Excise Goods. Natural Shortage is defined as shortage occurring during production, storage, or transportation within a DZ that is beyond the control of the Relevant Person due to the nature of the goods themselves, making it impossible to release the goods for consumption. The Independent Competent Entity issues a Report valid for one year that specifies the permissible, expected or actual percentage of Natural Shortage. The Relevant Person must then notify the FTA by submitting a declaration on the EmaraTax platform, and the declared shortage must not exceed the percentage stated in the Report. This process provides relief from Excise Tax liability for natural losses such as moisture evaporation, irretrievable residues in containers, and losses within production machinery under normal conditions, while excluding losses from negligence, theft, or operational inefficiencies. ## Key points • Effective date: 1 July 2025 • This Public Clarification replaces Public Clarification EXTP011 • Implements FTA Decision No. 6 of 2025, as amended by FTA Decision No. 1 of 2026 effective 27 January 2026 • Natural Shortage occurs during production, storage, or transportation of Excise Goods within a Designated Zone, is beyond the Relevant Person's control due to the nature of the goods, and makes it impossible to release the goods for consumption • Article 12(5) of the Executive Regulation provides exceptions to the general rule that shortage constitutes release for consumption • Warehouse Keepers or Taxable Persons must submit requests to FTA-approved Independent Competent Entities (laboratories) to determine Natural Shortage percentages • Independent Competent Entity conducts field visits and issues a Report based on inspection and actual data covering a period of no less than 6 previous months • Report is valid for one year from its date of issuance • Percentage of Natural Shortage in the declaration must not exceed the percentage stated in the Report • Declaration may be submitted for more than one Tax Period provided it does not cover more than 1 year • Report may be obtained without 6 months of previous data where a factory or new production line is established or a product is newly developed • Relevant Person must notify FTA within 20 Business Days from the date the percentage of Natural Shortage has changed due to operational changes • Relevant Person must apply for a new Report within 30 Business Days from the expiry date of the previous Report • If renewal application submitted within 30 Business Days, new Report is valid for 1 year from the day following expiry of previous Report • If renewal application submitted after 30 Business Days, new Report is valid for 1 year from issuance date, and shortage during the gap period is treated as released for consumption • Transitional provision: Reports issued within 12 months from 1 July 2025 are valid from 1 July 2025 until 30 June 2027, provided application submitted on or before 31 March 2026 • Examples of Natural Shortage include: reasonable moisture loss/evaporation, irretrievable residues in containers and distribution equipment, irretrievable losses within production machinery under normal operating conditions • Losses from negligence, theft, or operational inefficiencies are not considered Natural Shortage • Shortages above the approved percentage are considered release for consumption and subject to Excise Tax • Non-Natural Shortages (e.g., physical waste) must follow normal process via lost and damaged goods declaration • Process only applicable to Relevant Persons operating within a Designated Zone • Taxpayers operating outside a DZ are not eligible for Natural Shortage relief and cannot claim refunds • Article 12(1)(b) of the Executive Regulation: Excise Goods released for consumption when released from a DZ and entered into free circulation • Article 12(3)(d) of the Executive Regulation: Goods treated as leaving DZ when found deficient or in shortage • Article 12(5)(b) of the Executive Regulation: Exception where natural shortage meets FTA standards and controls, owner and Warehouse Keeper notify FTA, and documents are retained • Required documents include: detailed manufacturing process explanation, production formula with expected shortage, historical data, equipment manuals, and the Report from Independent Competent Entity ## This document relies on - [Federal Decree-Law No. 7 of 2017 on Excise Tax and amendments](https://solvefortax.com/legislation/74) (implements) - [Cabinet Decision No. 37 of 2017 on the Executive Regulation of the Federal Decree-Law No. 7 of 2017 on Excise Tax](https://solvefortax.com/legislation/105) (implements) - [Federal Tax Authority Decision No. 6 of 2025 on Standards, Controls and Procedures for Dealing with Shortage in the Excise Goods](https://solvefortax.com/legislation/100) (implements) - [EXTP011 - Excise Tax Public Clarification - Natural Shortage of Excise Goods](https://solvefortax.com/legislation/177) (replaces) ## Full text # Excise Tax Public Clarification EXTP014 **Natural Shortage of Excise Goods** **This Public Clarification replaces Public Clarification EXTP011.** ## Issue Excise Goods are treated as released from a Designated Zone (“DZ”) and entering into free circulation if they are found to be deficient, there is a shortage in their quantity within a DZ during transfer between DZ’s, or whilst held in a suspension arrangement in accordance with the Customs Legislation. However, Cabinet Decision No. 37 of 2017 on the Executive Regulation of the Federal Decree-Law No. 7 of 2017 on Excise Tax, and its amendments (“Executive Regulation”) provides an exception to the general rule, whereby a shortage in the quantity of the Excise Goods that occurs due to the natural characteristics of such goods within a DZ is not considered a release from a DZ in certain situations. FTA Decision No. 6 of 2025 on the Standards, Controls and Procedures for Dealing with Shortage Within the Designated Zone due to the Natural Characteristics of Excise Goods (“FTA Decision”) set out the standards, controls and procedures for dealing with Natural Shortage within a DZ, effective from 1 July 2025. The FTA Decision was amended by FTA Decision No. 1 of 2026, with effect from 27 January 2026. This Public Clarification outlines the situations under which Natural Shortage will not be considered a release for consumption from a DZ, and it clarifies the controls and procedures for dealing with such shortage, effective from 1 July 2025. ## Summary From 1 July 2025, Excise Goods1 shall not be considered as “released for consumption” where a Natural Shortage2 in the quantity of the Excise Goods occurs, provided the relevant conditions are fulfilled. In line with the FTA Decision, the Warehouse Keeper1 or Taxable Person1 (“Relevant Person”) storing/producing Excise Goods within a DZ1 may submit a request to Laboratories approved by the FTA (“Independent Competent Entity”)2 to determine the percentage of Natural Shortage in Excise Goods, along with the required documents. The Independent Competent Entity will review the request in accordance with the prescribed standards and controls set out in FTA Decision, and issue a report (“Report”)2 that includes details of the Excise Goods as well as the permissible, expected or actual percentage of Natural Shortage for such Excise Goods. Such Report shall be valid for one year from its date of issuance. The Relevant Person shall notify the FTA of the actual Natural Shortage by submitting a declaration on the EmaraTax platform. The percentage of Natural Shortage stated in the declaration must not exceed the percentage stated in the Report for that period and such declaration may be submitted for more than one Tax Period1 provided that it is not submitted for more than 1 year. Natural Shortage does not constitute a release of Excise Goods for consumption where the Relevant Person notifies the FTA, submits all the relevant supporting documents and the shortage falls within the percentage determined in the Report issued by the Independent Competent Entity. ## Detailed analysis ### Natural Shortage of Excise Goods Where Excise Goods are released from a DZ and entered into free circulation, the Excise Goods are considered to be released for consumption.3 One of the cases where Excise Goods are treated as released from a DZ and entered into free circulation is where they are found to be deficient or there is a shortage in their quantity within a DZ, during a transfer between DZs or whilst held under a suspension arrangement in accordance with the Customs Legislation.4 However, according to Article 12(5) of the Executive Regulation, Excise Goods are not regarded as being released for consumption where one of the specified exceptions apply.5 One of these exceptions is where there is a Natural Shortage in the quantity of Excise Goods in a DZ. A shortage in Excise Goods will be considered Natural Shortage2 where: 1. the shortage in the quantity of Excise Goods occurred during the production, storage or transportation of Excise Goods within a DZ, 2. the shortage is beyond the control of the Relevant Person due to the nature of the Goods themselves, and not for any other reason, and 3. the shortage is making it impossible to release the Excise Goods for consumption. The following are examples of circumstances in which Natural Shortage may occur: - reasonable levels of moisture loss/evaporation that are not due to negligence on the part of the Relevant Person as the case may be, - irretrievable residues left within containers and other distribution equipment, - irretrievable losses within production machinery under normal operating conditions. It should be noted that, any losses resulting from negligence, theft, or operational inefficiencies are not considered Natural Shortage. ### Procedures for dealing with the Natural Shortage Due to the different nature of each Excise Good, its storage conditions, manufacturing process and equipment, the percentage of Natural Shortage varies from one Excise Good to another. In line with the FTA Decision, Relevant Person subject to Excise Tax may submit a request to Independent Competent Entity to inspect the production and storage process of the Excise Goods, determine the percentage of the Natural Shortage of the Excise Goods. The Independent Competent Entity, upon the Relevant Person’s request, will conduct field visits to the Relevant Person’s warehouses or factories, and issue a Report on the permissible or expected percentage of Natural Shortage, based on the inspection and actual data covering a period of no less than 6 previous months. - The FTA notes that the Relevant Person may obtain a Report even when the actual data covering a period of no less than 6 previous months is not available, where: - the factory or the new production line is established, or - the product is newly developed. In such instances, the percentage of the Natural Shortage shall be determined based on the inspection and any actual data, if available. The FTA will publish a list of the names of the approved Independent Competent Entities. After obtaining a Report, the Relevant Person shall notify the FTA of the Natural Shortage through submitting a declaration on the EmaraTax platform, provided that the percentage of the Natural Shortage stated in the declaration does not exceed the percentage of shortage stated in the Report issued by the Independent Competent Entity, and that all the relevant supporting documents are retained by the Relevant Person. The declaration for Natural Shortage does not require approval from the FTA, and it may be submitted for more than one Tax Period provided that it is not submitted for more than 1 year. The FTA may visit the Relevant Person after the issuance of the Report or during an audit to inspect the production process and compare the percentages of Natural Shortages stated in its records and the Report with the percentages observed during the visit of the FTA’s team. ### Record keeping requirements The Relevant Person must retain documents proving the Natural Shortages and provide them to the FTA upon filing the declaration. These documents include, for example: - A detailed explanation of the manufacturing process, describing the stages in which a Natural Shortage of Excise Goods may occur. - A production formula that includes the expected shortage and deficiency (natural or non-natural). - The expected Natural Shortage percentage normally incurred, accompanied with supporting documents for previous periods. - Manufacturing equipment data and its operating manuals. - the Report issued by the Independent Competent Entity, and actual data for a period of no less than 6 previous months (if applicable). Furthermore, where the Relevant Person reports Natural Shortages of Excise Goods above the approved percentage, as stated in the Report, the shortage in the Excise Goods shall be considered as a release for consumption and the Relevant Person shall be liable to pay Excise Tax on such shortage. The FTA notes that any non-Natural Shortages (e.g. physical waste) will have to follow the normal process (i.e. by way of submitting a lost and damaged goods declaration). The process for determining Natural Shortage is exclusively applicable to the Relevant Person operating within a DZ. Taxpayers operating outside a DZ are not eligible for any relief pertaining to the Natural Shortage of Excise Goods and, consequently, cannot claim a refund of the Excise Tax paid on any shortage of Excise Goods. A declaration of Natural Shortage cannot be submitted if there is no valid Report issued by the Independent Competent Entity. ### Validity of the Report and renewal procedure The Report issued by the Independent Competent Entity that includes all Excise Goods as well as the permissible, expected or actual percentage of Natural Shortage for each, shall be considered valid for a period not exceeding one year from the date of issuance of such Report, provided there are no substantial or material changes in the Relevant Person’s circumstances and operations in the DZ that result in a change in Natural Shortage percentage. However, where a Relevant Person undergoes changes in its operations that would impact the levels of Natural Shortage they usually incur, including changes in the production line or storage conditions resulting in a change in their originally approved percentage, they shall inform the Independent Competent Entity within 20 Business Days from the date the percentage of the Natural Shortage has changed, with a request to issue a new Report reflecting the percentage of the Natural Shortage affected by the change. In coordination with the FTA, the Independent Competent Entity will conduct unannounced visits to verify the percentages of Natural Shortage and check that there is no change in such percentages. The Relevant Person must apply to the Independent Competent Entity for the issuance of a new Report on Natural Shortage within 30 Business Days from the expiry date of the previous Report, which should include the actual percentage of Natural Shortage incurred during the previous 12 months i.e. period covered by the previous Report, as well as the permissible or expected percentage of Natural Shortage for the next 12 months. Where the application is submitted within the specified timeline (i.e. within 30 Business Days from the expiry date of the previous Report), the new Report shall be valid for 1 year starting from the day following the expiry date of the previous Report. However, where the application is submitted beyond the specified timeline (i.e. after 30 Business Days from the expiry date of the previous Report), the new Report shall be valid for 1 year from its issuance date. In such cases, any Natural Shortage occurring during the period from the expiry date of the previous Report until the date of issuance of the new Report shall be treated as released for consumption, and Excise Tax shall be due accordingly. ### Transitional Provisions For a transitional period, any Report issued by the Independent Competent Entity within 12 months from 1 July 2025, shall be deemed to be valid from 1 July 2025 until 30 June 2027, provided that the Relevant Person submits the application for issuance of the Report to the Independent Competent Entity on or before 31 March 2026. --- *This Public Clarification issued by the FTA is meant to clarify certain aspects related to the implementation of the Federal Decree-Law No. 7 of 2017 on Excise Tax, and its amendments, its Executive Regulation and its amendments, and FTA Decision No. 6 of 2025 on the Standards, Controls and Procedures for Dealing with Shortage Within the Designated Zone due to the Natural Characteristics of Excise Goods and its amendments.* *This Public Clarification states the position of the FTA and neither amends nor seeks to amend any provision of the aforementioned legislation. Therefore, it is effective as of the date of implementation of the relevant legislation, unless stated otherwise.* --- ## Legislative References: In this clarification, Federal Decree-Law No. 7 of 2017 on Excise Tax, and its amendments, is referred to as “Decree-Law”, Cabinet Decision No. 37 of 2017 on the Executive Regulation of the Federal Decree-Law No. 7 of 2017 on Excise Tax, and its amendments, is referred to as “Executive Regulation”. 1. Article 1 of the Decree-Law defines the following terms as: - “Excise Goods” - Goods that will be determined as being subject to Tax by a Cabinet Decision upon the recommendation of the Minister. - “Warehouse Keeper” - Any Person approved and registered at the FTA to supervise a Designated Zone in accordance with the provisions of the Executive Regulation of the Decree-Law. - “Designated Zone” - Any fenced area established as a free zone that cannot be entered or exited except through a designated road, and any area designated by the FTA as being subject to the supervision of a Warehouse Keeper, in accordance with the provisions of the Executive Regulation of the Decree-Law. - “Taxable Person” - Any Person registered or obligated to register for Tax purposes under the provisions of the Decree-Law. - “Tax Period” - A specific period of time for which the Payable Tax shall be calculated and paid. 2. FTA Decision No. 6 of 2025 defines the following terms as: - “Natural Shortage” - A shortage in the quantity of Excise Goods during the production, storage, or transportation of Excise Goods within the Designated Zone, which is beyond the control of the Taxable Person due to the nature of the Goods themselves and not for any other reason, making it impossible to release the Excise Goods for consumption. - “Report” - A Report issued by the Independent Competent Entity that includes the Excise Goods as well as the permissible, expected or actual percentage of Natural Shortage for each Excise Good. - “Independent Competent Entity” - Laboratories approved by the Authority to which Warehouse Keepers and Taxable Persons subject to Excise Tax may submit a request to determine the permissible percentage of Natural Shortage. 3. Article 12(1)(b) of the Executive Regulation states that Excise Goods are released for consumption where there is a release of Excise Goods from a Designated Zone and enter such Excise Goods into free circulation. 4. Article 12(3)(d) of the Executive Regulation states that, for the purposes of Article 12(1)(b), Excise Goods shall be treated as leaving a Designated Zone and enter free circulation where they are found to be deficient or there is shortage in their quantity from a Designated Zone or during transfer between Designated Zones or whilst held in a suspension arrangement in accordance with the Customs Legislation. 5. Article 12(5)(b) of the Executive Regulation states that as an exception to Article 12(3)(d) of the Executive Regulation, release of Excise Goods for consumption is not deemed to have occurred if there is a natural shortage in the quantity of Excise Goods in a Designated Zone, where all of the following conditions are met: 1) the shortage is as a result of the natural characteristics of the good and meets the standards and controls specified by the FTA, 2) the owner of the Excise Goods and the Warehouse Keeper notify the FTA of the shortage resulting from natural characteristics, in accordance with the procedures and mechanisms approved by the FTA in this regard, and 3) the owner of the Excise Goods and the Warehouse Keeper keep documents proving the shortage resulting from the natural characteristics of the goods and submit them to the FTA upon request.