Taxes are duties levied on certain products and services by the authorities such as an excise and taxation department of a country. The concept of tax is not something new and exists for centuries. People must pay excise tax that is collected by the government to invest back in providing services and benefits to the people of their state. It is the responsibility of the government to provide for the welfare of its people and to manage the distribution of wealth among its masses to keep economic as well as social stability. On the other hand, the people must register and pay excise tax as soon as they become eligible as a taxpayer.
Since October 2017, a federal excise tax has been implemented by the government of UAE under the regulation of Federal Tax Authority. The government of UAE has been providing free of cost educational, healthcare, environmental and other services to its people as a welfare state. In addition to this, they invest in developing world-class infrastructure facilities for the people. In order to not to rely more on an oil-based economy, that has been unstable in the recent past, new ways to generate finances for economical benefits had to be derived. It is needed so to continue providing for the welfare of the people and development of the country.
To create policies for controlling the market availability of certain products that could harm humans when used in excess is also the responsibility of a government. The implementation of excise tax in Dubai and other emirates of UAE is a step towards the same.
Eligibility for Registering Excise Tax In UAE
It is very important to understand the tax policy defined by FTA in UAE to know who is supposed to register for and pay excise tax along with clear knowledge of items on which excise duty is implemented.
The excise tax in UAE has been placed on certain products in the UAE referred to as excise goods. The products subjected to excise taxation are those only which can be harmful to human health if consumed without control. Excise goods are defined under 3 categories and for each category, the applicable excise tax is also defined. They include:
- 50% excise tax duty on the retail price of all carbonated products.
- Includes all aerated beverages like juices, soft drinks, squashes etc.
- Includes all concentrations, powders, gels and ingredient used to form an aerated drink.
- Does not include Sparkling water.
- 100% excise tax rate on the retail price of all drinks referred to as Energy drinks.
- Includes all edible products utilized to energize and stimulate the human body.
- Includes all the products that have the aforementioned effects.
Tobacco and Tobacco Products:
- 100% excise duty applies to all the products under this category.
- Includes all the items listed within Schedule 24 of GCC common customs tariff.
Excise Tax Due Date
Excise duty in Dubai or the other Emirates of UAE is paid through the Federal Tax Authority’s online portal. A registered taxpayer will have to make a monthly filing of excise tax. Excise Tax is not a transaction-based tax like a VAT. Therefore, it is paid only once in the circulation channel of taxable items. Though it is charged on the retail price of a product, it has nothing to do with the product being sold for consumption in the local markets. For the same reason, like VAT, there is no threshold defined for the excise tax. Be it a free zone or mainland, excise tax becomes due as soon as the tax is filed by the taxpayer. In some cases, like designated tax zones, as the products come out of such zones, the tax has to be paid before the excise goods enter the local market for consumption.
Registration as Excise Tax Payer
An Excise Taxpayer will have to excise tax registration UAE on FTA’s online portal as soon as they become eligible for making excise duty payment. Anyone who fulfils the following criteria will be eligible as a taxpayer:
- Importers of excise goods into the UAE.
- The producers or manufacturers of excise goods where the goods are released for consumption in the UAE.
- The stockpilers of excise goods in the UAE. Means a person or a business that holds the stock of excise goods and cannot prove if the goods have been taxed before.
- Anyone who is responsible for an excise warehouse or designated zone i.e. a warehouse keeper. The designated zones or excise warehouses are specified areas of storage where excise goods are immediately stored after being imported and without circulation into the local markets of UAE. As soon as the good leave these areas to enter the markets of UAE for consumption, the goods will be considered imported and excise tax becomes due to be paid.
Paying Excise Tax
A taxable entity must pay excise tax online through their registered FTA e-services account as soon as it becomes due. For online excise payment, the taxable entity has to get itself registered as a taxpayer and also add each taxable item into the list of taxable products defining the rate of tax.
The said list on the FTA portal can be used as a reference to calculate the excise tax on existing and newly entered items.
The process to register for, file and pay excise tax seems to be very simple but being a system that is a little more than a year old in UAE, also has its complications. Late or wrong registration and filing can make taxpayer subject to penalties from FTA. Farahat & Co, with its team of certified tax experts, understand all the requirements and necessities to register and file excise tax. You can appoint one of our tax experts as your representative for the tax-related issues and also get help consulting them about the excise tax-related laws in the UAE.