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UAE Excise Tax – Explained

UAE and other GCC were considered as totally tax-free countries for the businesses till the recent past years. But taxes, in the form of VAT and excise tax in the UAE and some other GCC countries, are already here. It is true that excise tax has been implemented now in the UAE for a little more than a year till this day. The excise tax registration UAE has been opened for taxpayers under the new tax law since September 2017.

The New Tax Policy

 Among the GCC countries, the excise tax UAE is in place since October 01, 2017. Kingdom of Saudi Arabia and Bahrain were to come together with implementing tax policies at the start of the years 2018 and 2019 respectively. The rest will be following to implement the taxes under the pact signed by the Gulf Cooperation Council (GCC) members in 2017.

A totally tax-free economy is not considered as normal. The global economic institutions like IMF has been suggesting for quite long, to the tax-free countries, to implement tax as the system of tax ensures continuity of providing people with facilities like affordable and quality education, health and infrastructure etc.

Benefits of Collecting Tax

 The unstable oil prices, on what the economy of GCC counties was dependent, were not favourable for the government to keep providing for the welfare of its people. The revenues generated through taxes like collecting excise duty can help the government to keep fulfilling the expectations of its people by providing them with basic facilities for free or within affordable costs.

How Much Is the Tax?

The new laws for excise and taxation in the UAE are regulated by the Federal Tax Authority (FTA). The FTA has clearly defined the tax rates under the laws approved by the Federal Government. The good news is that the defined Tax rates for the products and services utilized by all the people have been taxed really at a small rate of 5% only as a VAT on sales.  The tax law has been fair to exclude the services like education, healthcare, transportation and real estate along with financial transitions from the VAT considering them the basic right of people.

Similarly, the excise tax laws in the UAE are implemented as an indirect tax not only to generate revenues through collecting excise tax in Dubai and all other Emirates of UAE but also, to control the consumption of those products that are considered harmful for the human beings and for the environment. This strategy to implement excise taxation in UAE is an impressive move towards the welfare of people.  For this reason, 50% excise tax duty is levied on all carbonated drinks and products That can either be referred to as carbonated drinks or used to make carbonated drinks. Here it is to note that any colourless and flavourless carbonated drinks like carbonated or sparkling water are excluded from the list of taxable items in UAE.

On products that can be referred to as Energy drinks or used to stimulate energy in the human body are taxed 100% excise duty in Dubai and all over UAE. Now the importers and manufacturer who deal in tobacco and tobacco goods shall also pay excise tax before the goods enter UAE markets for consumption. The excise tax on Tobacco products is also 100%.

Filing Excise Tax

 The FTA, even before the implementation of excise tax in UAE, had launched their online portal for providing assistance to taxpayers. The taxpayers can register through e-services on this portal if they are eligible under the criteria defined to pay excise tax by the Federal excise tax laws. All the information to understand the excise tax is made available on this portal. After excise tax registration, the taxpayer can file excise tax through the same portal to pay excise tax online.

Calculating Excise Tax

The excise tax is charged only one time in the circulation cycle of taxable products from being imported or manufactured to come out to market for consumption. It is important to know that the excise tax is applied to the retail price of the unit taxable product. This means if in a store, the shelf selling price of a carbonated drink is AED. 2, the excise duty as per 50% tax rate on carbonated drinks will add up AED. 1 to the total price making it cost AED. 3.

After registering excise tax in UAE, the taxpayers can access a list of all taxable products and items through FTA portal to find their retail prices. These prices have been added with the help of data collected from market sellers and price control mechanism and can be used as a reference to calculate excise tax on certain products and items. The portal also provides an option to add and update new products and items into the list.

Due Date to Pay Excise Tax

The online excise payment has to be paid as soon the taxable products leave the designated zones or excise warehouses to enter the markets of UAE for consumption. It also becomes due to pay the excise tax, if taxable goods are not directly distributed in the market but collected by stockpilers to distribution. A traveller entering UAE is also subjected to pay excise duty tax on arrival when in possession of taxable products above allowed quantity. Registered taxpayers are supposed to file excise tax every month and the excise tax payments become due as soon as the tax is filed.

Excise Tax Experts

The Excise tax experts at Farahat & Co., are well qualified with all the bits and bytes of excise tax laws in the UAE. The process to register, calculate and file excise tax may sound very user-friendly but a little mistake and negligence in compliance can result in penalties. With the tax experts of Farahat & Co., you need not worrying about your excise tax liabilities. Just hire the services of our expert team and they will take the burden of your tax-related work, allowing you to keep focusing on success with your business.