How to Calculate Excise Tax in UAE

UAE Excise tax is a form of indirect tax levied on specific goods that are typically harmful to human health or the environment. These goods are referred to as “excise goods”. The UAE Government introduced an excise tax in 2017 to reduce the consumption of unhealthy and harmful commodities while also raising revenues for the government that can be spent on beneficial public services.

What is UAE Excise Tax?

Excise tax is a type of indirect tax that is applied to certain goods that are harmful to human health or the environment, such as tobacco, energy drinks, carbonated drinks, and electronic smoking devices. The purpose of excise tax is to reduce the consumption of these goods and to raise revenue for the government to spend on public services.

Excise tax is paid by the person who imports, produces, releases, or stockpiles the excise goods in the UAE. In some cases, the tax may be transferred to another person if the original person fails to pay. The person who pays the excise tax must register with the Federal Tax Authority (FTA) and file excise tax returns monthly.

Consumers who buy excise goods in the UAE can expect that the excise tax has been included in the price they pay. Some excise goods may have a digital tax stamp to show that the excise tax has been paid.

What are the excise goods and tax rates in UAE?

Excise tax is charged on the retail price of the excise goods, which is the price paid by the final consumer. The tax rate varies depending on the type of goods, as follows:

Excise Goods	Tax Rate
Carbonated drinks	50%
Tobacco products	100%
Energy drinks	100%
Electronic smoking devices and tools	100%
Liquids used in electronic smoking devices and tools	100%
Any product with added sugar or other sweeteners	50%

• Carbonated drinks include any aerated beverage except for unflavoured aerated water. Also considered to be carbonated drinks are any concentrations, powder, gel, or extracts intended to be made into an aerated beverage.
• Energy drinks include any beverages that are marketed, or sold as energy drinks, and contain stimulant substances that provide mental and physical stimulation, which includes without limitation: caffeine, taurine, ginseng, and guarana. This also includes any substance that has an identical or similar effect as the aforementioned substances. Also considered to be energy drinks are any concentrations, powder, gel or extracts intended to be made into an energy-enhancing drink.
• Tobacco and tobacco products include all items listed within Schedule 24 of the GCC Common Customs Tariff.
• Electronic smoking devices include e-cigarettes, e-cigars, e-pipes, e-shisha and any similar devices that can be used to inhale nicotine or any other substance.
• Liquids used in electronic smoking devices include any solutions, liquids or juices that can be used in electronic smoking devices, regardless of their nicotine content or flavor.
• Any product with added sugar or other sweeteners include any solid or liquid substance or product to which a sugar or any other sweetener is added, such as: juice, concentrates, powders, extracts, syrups, and any product that can be converted into a drink.

How to calculate the excise tax in UAE?

To calculate the excise tax, you need to know the excise price of the goods. The excise price is the higher of:

• The price published by the Federal Tax Authority (FTA) in a list of excise goods; or
• The designated retail sales price of the goods, minus any excise tax already included.

The excise price also includes any other taxes or duties on the goods, except VAT.

The new selling price of the goods is the excise price plus the excise tax plus VAT. For example, if the excise price of a good is 10 AED and the tax rate is 50%, the excise tax is 5 AED and the new selling price is 15 AED plus VAT. If the tax rate is 100%, the excise tax is 10 AED and the new selling price is 20 AED plus VAT.

• How to calculate the payable tax

The payable tax is the amount of excise tax that a taxable person owes to the Federal Tax Authority (FTA) for a certain tax period. The taxable person is anyone who imports, produces, releases, or stockpiles the excise goods in the UAE.

To calculate the payable tax, you need to subtract the deductible tax from the due tax. The due tax is the total amount of excise tax that the taxable person has to pay for the excise goods in the tax period. The deductible tax is the amount of excise tax that the taxable person can deduct from the due tax in some cases.

The deductible tax includes:

• The tax paid on excise goods that have been exported out of the UAE.
• The tax paid on excise goods that have been used to make another excise good that is or will be taxed.
• The amounts paid to the FTA by mistake.
• The FTA has specified the conditions and controls for deducting the tax, in the executive regulation of the excise tax law.

How to file and pay the Excise tax returns

The tax return is a form that the taxable person has to submit to the FTA to report the payable tax and the details of the excise goods for a tax period. The tax period is the time frame for which the excise tax is calculated and paid. The taxable person has to submit the tax return and pay the payable tax to the FTA at the end of each tax period. 

• Who should file an excise tax return?

Every taxable person who deals with excise goods in the UAE is required to file an excise tax return summarising the excise tax due to the FTA for the tax period.

• What is the tax period and the due date?

If you are a Taxable Person who has to pay Excise Tax, you need to file your Excise Tax Returns every month. The due date to file your Excise Tax Returns is the 15th day of each month. When a Taxable Person has to report Excise Tax, they have to submit the Excise Tax Declaration and reporting forms either for each transaction or for each month, depending on the situation. The standard tax period is one calendar month, however, a longer tax period may be agreed directly with the FTA in certain circumstances. The excise tax return is required to be submitted online to the FTA. 

Conclusion

Excise tax is a tax on specific goods that are harmful to human health or the environment. The UAE Government levies excise tax to discourage the consumption of these goods and to generate revenue for public services. The excise tax is calculated based on the retail price of the excise goods and the applicable tax rate. The businesses that deal with excise goods must register, file, and pay the excise tax to the FTA on a monthly basis.

Get Professional Excise Tax Services from Farahat & Co. in the UAE

If you are looking for professional assistance with calculating and filing excise tax in the UAE, Farahat & Co. can help you. Farahat & Co. is a leading tax consultancy firm that has extensive experience and expertise in excise tax compliance. They can help you with:

• Registering for excise tax with the Federal Tax Authority (FTA)
• Determining the excise price and the payable tax for your excise goods.
• Filing and paying the excise tax return.
• Keeping accurate records and documents of your excise transactions.
• Dealing with any queries or audits from the FTA.

Farahat & Co. can also advise you on how to optimize your cash flow and reduce your tax liability by applying the best practices and strategies for excise tax. They can also keep you updated on the latest changes and developments in the excise tax law and regulations.

Read More: Excise Tax Facts: Everything You Need to Know