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UAE Excise Tax Law: Everything You Need To Know

It is been widely known that the Value Added Tax (VAT) rate will be 5%, and recently, there is another tax that has been introduced—the Excise Tax. Excise Tax  applied to tobacco, energy drinks, and carbonated drinks.  The rates of each are 100%, 100%, and 50%, respectively. The latter is expecting to affect consumers in a way that will encourage them in opting to lean on healthy lifestyle, citing that health problems have been noted in the country, such as cancer and obesity. One of the government’s goals is to eradicate these or at least lessen them in the country.

You should know: How to Register and Pay Excise Tax in the UAE

Excise Tax Law will apply to the following goods:

  • Carbonated drinks (50%)
    Carbonated drinks are those beverages that have carbon dioxide dissolved in them. Examples of these are Pepsi, Coca-Cola, Fanta, etc. Other things such as concentrations, powder, gel, or extracts that produced for concocting them into carbonated drinks also covered in the list. However, the exception for this is the flavored water.
  • Tobacco products (100%)
    Schedule 24 of the GCC Common Customs Tariff has all the entries that encompassed tobacco and tobacco products.
  • Energy drinks (100%)
    Energy drinks are those products that marketed to have physical and mental enhancement. These drinks have stimulant drugs that increase alertness. The following comprises the list of energy drinks: caffeine, taurine, ginseng, and guarana. The products with the same effects as the precedents also considered as one.

Other things such as concentrations, powder, gel, or extracts that produced for concocting them into energy drinks also covered in the list.

A Businessman will Charged for Excise Tax at What Point ?

The Excise Tax will applied in three situations :

  1.  At the time of excise goods production,
  2. At the time of importing the excise goods, and
  3. Or at the time of importing the excise goods

The Products are usually charge during their release for consumption. The producer, manufacturer, or importer of the aforementioned goods will pay the Excise Tax at the time of release for consumption.
Excise Tax is refunded in some cases in the prevention of collecting the Excise Tax twice in one supply chain (e.g., raw tobacco will have Excise Taxes and even when it’s been manufactured into cigarettes).

What is the Rate and Method of Charging Excise Tax in UAE?

Excise Tax can charged using two methods:

Ad Valorem Excise Taxes

The Ad Valorem is the Latin phrase equivalent of “according to value”. This kind of method is basing the tax charge on the value of the goods or services. (e.g., if a soda today costs AED 1 and the tax rate 50%, then the Excise Tax will  AED 0.50)

Specific Excise Taxes

This kind of method does not base on quantity but charges a specific rate on the quantity (e.g., pack, kilogram)

The Excise Tax in GCC will imposed using the Ad Valorem Excise Tax.

How to Prepare for Excise Tax?

The Federal Tax Authority (FTA) has released some information regarding the imminent implementation of the Excise Tax. It is essential to be aware of this information to help you and your business tackle the new concept of Excise Tax in UAE.
The business will be subject to penal measures If non-compliance found during audits of FTA, which they have an authority to do.

You may want to know: Excise Tax Facts

Compliance with Excise Tax:

Executive Regulation of Federal Decree-Law Number 7 of 2017 or Excise Tax Law will give a period for tax payment.
Before a manufacturer decides to remove its locally produced goods from its place of production, the said manufacturer is responsible for the remittance of the Excise Tax to the tax authorities.
Before imported goods are removed from the customs area, it is necessary for the importer to remit the Excise Tax to the tax authorities.
Excise Tax returns is file electronically on a monthly basis It’s expected. The FTA will charged the amount Within 15 days of the filing.

Read More: Tax in UAE: Online Portal for VAT & Excise Tax Registration is Open Now

Excise Tax Registration

Any business has the responsibility with regard to excise tax it involved in the following :

  • Importing excise goods into the UAE
  • Producing excise goods for consumption in the UAE
  • Stockpiling of excise goods in particular instances in the UAE
  • Overseer of an excise warehouse or an appointed place (i.e., a warehouse keeper)

The Stockpile is define as a bulk supply that stored for future use. Hence, a stockpiler is someone whom or a business that is keeping plenty of excise goods.  This is done for business purposes and it cannot be proven that they have paid the excise tax in Dubai UAE on those products. Business is not consider as stockpiler not accounted to pay for products excise tax that possess before excise tax implemented. However, there are more details to distinguish if a business is a stockpiler—excise tax executive regulations.

The excise tax is for every business that is part of planning to be part of the above listed activities. Because no minimum annual income is required for the Excise Tax. Therefore, it is necessary for all businesses that fall into the categories to registering excise tax in UAE before the implementation date. you can also take help from Vat consultants in UAE Farahat and co.

Ervee is a CPA with international experience in Tax and Accounting. He has over 12 years of experience in accounting and bookkeeping and over a year in VAT implementation, registration, and accounting in UAE. He regularly drives out inefficiencies in company operations and loves the challenge of helping clients find additional ways for an easier and improved compliance and verification of transactions. Read more