Excise tax in UAE is a form of indirect tax levied on certain goods deemed harmful to public health or the environment. These include products such as tobacco, energy drinks, and carbonated beverages. However, there are ways for businesses to reduce their excise tax liability, particularly through designated zones. This guide seeks to explain what designated zones are and how businesses can utilize them to claim excise tax deductions.
The Scope of Designated Zones in UAE
Designated zones are specific areas within the UAE that are considered outside the customs territory for excise tax purposes. This means that goods brought into these zones are not subject to excise tax until they leave the designated area. Designated zones provide businesses with a tax-efficient environment to store, manufacture, and distribute goods, making them an attractive option for companies looking to reduce their excise tax liability.
Excise tax is levied at a standard rate of 100% on tobacco and energy drinks, and 50% on carbonated beverages. However, businesses operating in designated zones can benefit from certain exemptions and deductions regarding excise tax UAE. One such exemption is that goods stored or manufactured in designated zones are not subject to excise tax until they are released into the UAE market. Additionally, goods that are imported into a designated zone and subsequently re-exported are also exempt from excise tax. Businesses operating in designated zones can also claim excise tax deductions on goods that are consumed within the designated zone, provided that they meet certain conditions.
Step-by-Step Guide on How to Claim Excise Tax UAE Deductions
To claim excise tax deductions in designated zones in the UAE, businesses must follow a specific process. Here is a step-by-step guide to help businesses claim excise tax deductions:
1. Register with the Federal Tax Authority (FTA) and obtain a Tax Registration Number (TRN).
2. Ensure that the goods meet the eligibility requirements for excise tax deductions. These include:
- The goods must be stored or manufactured within a designated zone.
- The goods must not be transferred to another location within the UAE.
- The goods must not be subject to any other form of tax or duty.
3. Keep accurate records of inventory and sales, including invoices, customs declarations, and inventory reports.
4. Submit an application for excise tax deductions to the FTA. The application should include the following documents:
- A list of the goods for which the excise tax deductions are being claimed.
- Invoices and other supporting documents that show the value of the goods and the amount of excise tax paid.
- A declaration that the goods meet the eligibility requirements for excise tax deductions.
5. Wait for the FTA to review and approve the application.
6. Deduct the excise tax amount from the total tax liability.
It is important for businesses to maintain accurate records to support their claims for excise tax deductions. This will help to ensure that their applications are approved by the FTA.
Examples of Excise Tax Deductions in Designated Zones
Several businesses in the UAE have already benefited from excise tax deductions in designated zones. For example, a company that manufactures energy drinks in a designated zone can claim excise tax deductions on the energy drinks that are consumed within the designated zone. This can result in significant cost savings for the company. Another example is a company that imports tobacco products into a designated zone and subsequently re-exports them. This company would not be subject to an excise tax on tobacco products, resulting in significant cost savings.
Savings and Advantages of Utilizing Designated Zones for Excise Tax Deductions
Designated zones in the UAE provide businesses with a tax-efficient environment to store, manufacture, and distribute goods. By utilizing designated zones, businesses can benefit from excise tax exemptions and deductions, resulting in significant cost savings. Additionally, designated zones provide businesses with access to world-class infrastructure, such as state-of-the-art logistics facilities, which can help to streamline their operations and reduce costs.
In conclusion, excise tax UAE deductions in designated zones can be a valuable tool for businesses operating in the UAE to reduce their tax liability and improve their bottom line. By understanding the eligibility requirements, documentation requirements, and application process, businesses can take advantage of these tax-efficient zones and maximize their savings. As more businesses seek to expand their operations in the UAE, utilizing designated zones can provide a competitive advantage and support continued growth.
Choose the Expert Services of UAE Tax Consultants
It is imperative for taxable persons to avail of the services of UAE tax consultants to seamlessly navigate and combat tax complexities. Tax consultants in UAE assist taxable persons to avail of tax deductions in designated zones and to stay compliant to tax regulations and standards. Thus contact us today and we shall be happy to assist you.