How to Claim a Refund of Excise Tax in UAE

The UAE has introduced a tax system for excise goods, products considered harmful to human health or the environment, such as tobacco, energy drinks, and carbonated drinks. The system aims to reduce consumption of these goods while generating government revenue. It’s governed by Ministerial Decision No. 108 of 2023, which specifies the rules and procedures for excise tax returns, tax periods, and payments.

One aspect of the system is the possibility of claiming a refund of excise tax already paid, in specific cases such as when products are exported or used for official purposes. This article explains the main conditions for claiming a refund, the application process, a worked example with realistic timelines, and common reasons applications get rejected.

Also check: Excise Tax UAE

When Can a Refund of Excise Tax Be Claimed?

According to the Ministerial Decision, a refund of excise tax can be claimed in the following situations:

• Excise goods for official use by foreign entities. Where products are obtained by a foreign government, international organization, diplomatic body, or mission for official purposes, and the entity’s country of origin either excludes UAE entities from equivalent excise tax obligations or provides a reciprocal refund under an international treaty or agreement, the tax isn’t required to be paid. There must be no commercial or resale purpose for the goods.
• Import and export within the GCC. Where excise goods are imported into the UAE by a person registered in another GCC state that implements an excise tax system, and the goods are subsequently exported to that other GCC state with tax paid there, the person must provide evidence of their taxable status in the other GCC state, proof of UAE tax payment, proof of export, and proof of tax payment in the destination state.
• Direct export by a non-taxable person. Where excise goods are directly exported by a non-taxable person conducting business, with tax previously paid by a taxable person in the UAE, the exporter must substantiate the UAE tax payment, prove export outside the UAE, and confirm the goods weren’t used or altered between supply and export, beyond preparation necessary for export.
• Indirect export by a non-taxable person. Where goods are indirectly exported by a non-taxable person, with tax previously paid by a taxable person, the exempt party must prove UAE tax payment and show the goods were supplied to a customer outside the UAE who is responsible for the physical export, with the same restriction on use or alteration between supply and export.

Must check: Excise Tax Consultancy

How to Apply for a Refund of Excise Tax

A refund application is submitted to the authority through the specified means and procedures, and must include:

• The applicant’s name, address, and registration number, if applicable
• Details of the excise goods, including description, quantity, value, and tax paid
• Transaction details, including date, invoice number, and supplier and recipient names and addresses
• The objective of the refund claim, official use, export, or other
• Evidence of meeting the relevant conditions, such as customs declaration, commercial evidence, shipping certificate, or official evidence
• The applicant’s bank account details for the refund transfer

Refund Application Review and Notification Process

The authority reviews the refund application and supporting documents, and may request additional information or evidence where needed. It may reject the application if it doesn’t meet the criteria, or if documentation is insufficient or invalid. Notification of approval or rejection, and the relevant refund amount if applicable, is provided within 60 days of submission. Where approved, the refund amount is transferred to the applicant’s bank account within 15 days of that notification.

Worked Example: Direct Export Refund From Start to Finish

A UAE distributor pays excise tax of AED 200,000 on a shipment of energy drinks when the goods are produced domestically. Six weeks later, a non-taxable exporting business directly exports the same shipment outside the UAE, having kept the goods unaltered aside from standard export preparation. The exporter submits a refund application on day 1, including the customs export declaration, proof the original AED 200,000 excise tax was paid, and transaction details linking the exported goods to the original taxed shipment. The authority reviews the application and, on day 55, notifies the exporter of approval. The refund of AED 200,000 is transferred to the exporter’s bank account by day 70, within the 15-day window following notification. From initial submission to funds received, the process takes up to roughly 75 days when both timelines run their full course, though many approvals and transfers happen faster.

Common Reasons a Refund Application Is Rejected

• Insufficient proof the goods weren’t used or altered before export. Beyond standard export preparation, any use or modification of the goods between supply and export can invalidate the direct or indirect export refund category.
• Missing or inconsistent transaction documentation. Invoice details, supplier and recipient information, and customs declarations need to align consistently across all submitted evidence.
• Incomplete proof of original UAE tax payment. The applicant needs to clearly substantiate that excise tax was actually paid on the specific goods being claimed, not just that tax was paid generally.
• Missing reciprocity evidence for official use claims. Foreign entity claims specifically require evidence that the entity’s home country either excludes UAE entities from equivalent tax or provides a reciprocal refund under a relevant treaty.

The tax system for excise products in the UAE allows for claiming a refund in these specific cases, and the FTA, alongside the customs department, monitors and enforces the system, applying penalties for violations or non-compliance.

Frequently Asked Questions (FAQs)

How Farahat & Co. Can Help

Farahat & Co., a trusted Tax Firm in UAE, provides audit, corporate tax, and excise tax services, including refund application preparation and documentation review.

Contact Farahat & Co. today to discuss your excise tax refund requirements.