The UAE Excise tax is a tax imposed on explicit goods that helps as a vital financial tool. In the UAE, its obligation mainly aims to reduce the consumption of unhealthy goods. This constituent establishes a portion of the government's overall tax structure, yet the revenue collective serves as a key funding source for miscellaneous public welfare initiatives. This approach reverberates with the wider intent of restricting the usage of harmful merchandise, uplifting public health standards, and funding projects benefitting the public.
Which items are subject to Excise tax in the UAE?
Excise tax in UAE is imposed on explicit goods known for their likely health risks. These products include;
- Tobacco and tobacco products
- Carbonated drinks
- Electronic Smoking Devices and tools
- Liquids used in electronic smoking devices
- Energy drinks
These items, as per the excise goods list, are subject to excise duty in UAE. Obeying with excise tax guidelines in Dubai and across the UAE involves understanding the detailed categories affected by this taxation. It ensures obedience to compliance measures.
What is the tax rate on excise goods?
The tax rates on different excise items are;
| Excise items | Tax Rate |
| Carbonated Drinks | 50% |
| Energy Drinks | 100% |
| Sweetened Drinks | 50% |
| Electronic smoking devices and the refill liquid | 100% |
| Luxury Goods such as cars, jewelry, and yachts | 20% |
How to Calculate Excise Tax in UAE?
Understanding how excise tax is calculated in UAE includes an important process including a few key steps such as;
Recognize the Product Group
Different products fall under different groups that regulate their excise tax rates. These groups include Selective Goods, Luxury Goods, or those exempted from excise tax.
Determine the Product Price before Tax
For precise calculations, establish the product's price before any taxes or duties are imposed.
Apply the Excise Tax Formula
Once the product group and pre-tax price are recognized, apply the subsequent formula to calculate excise tax such as;
Excise Tax = (Product Price before Tax) x (Excise Tax Rate)
For example, consider buying a product considered under Selective Goods, such as a packet of cigarettes priced at AED 20 before tax. It will be calculated as Excise Tax = AED 20 x Excise Tax Rate.
Substituting the explicit excise tax rate into the formula will yield the excise tax total appropriate to the product.
Additional methods
The UAE develops 2 methods to calculate excise tax such as;
| Methods | Details |
| Specific Method | It involves a static rate per product unit (e.g., AED 0.4 per cigarette). |
| Ad Valorem Method | In this, it uses a percentage of the product's value. |
What are the new amendments to the Excise Tax?
Article 1 of the Amended Executive Regulation has expanded its range by including additional definitions that add the current mentioned in Federal Decree-Law No. (7) of 2017 on Excise Tax. Within the 'Definitions' section of Article 1, 3 new terms have been presented such as;
- Official Evidence
- Commercial Evidence
- Shipping Certificate
These newly presented terms line up thoroughly with the definitions specified in the UAE VAT regulation. By incorporating these terms, the regulation gains accuracy and precision that provides clear definitions for essential concepts. Here are the new amendments to the Excise Tax;
Reviewing Stockpile and Audited Reports of Excise Goods
As per Article 11 (5) of the Amended Excise Tax Regulation, the lack of kept audited records for stockpiled Excise Goods might result in the FTA classifying the whole inventory as "excessive." This cataloguing could rapid full liability for Excise Tax. During Excise Tax audits, the failure of taxpayers to provide an audited report for stockpiled goods upon demand will significantly influence their compliance status. This situation highlights the importance of careful record-keeping for excise tax compliance within the UAE's governing context.
Granting the FTA Authority for Compulsory Deregistration
In compliance with sections (2) and (5) within Article 6 of the Amended Excise Tax Regulation, the Federal Tax Authority has been approved the authority to obligate the deregistration of an Excise Taxable Person if they conclude activities that cause Excise Tax liability for a constant period of 6 months. This deregistration is compulsory unless evidence is provided signifying an intent to restart such actions within the following 6 months.
Implementation of All-inclusive Export Exemption Criteria
Article 14 of the Amended Executive Regulation discusses all-inclusive adjustments in the supporting documentation fundamentals for overlooking Excise Goods exports from Excise Tax compulsions. These amendments highlight a more complicated set of document basics compared to the prior regulation. The revised article defines the explicit document types important for both direct and indirect exports to be suitable for Excise Tax exemption.
Also, regarding exported Excise Goods, Customs Departments now grip a new requirement to cross-verify the type and measure of these goods in contradiction of the dispensed export documents. This verification way follows Customs procedures and lines up with the tax risk matrix cataloging established in coordination with the FTA. This thorough approach highlights the FTA's increased inspection of export transactions, chiefly in indirect tax scenarios.
The aim is to authenticate the evidence of goods departing the UAE, ensuring eligibility for numerous requirements like Excise Tax exemption or VAT zero-rating. This strong authentication mechanism lines up with the FTA's importance on strengthening compliance and restructuring procedures within the excise tax compliance framework in the UAE.
Compliance Requirements in Excise Tax Designated Zones
Under Article 15 of the Amended Excise Tax Regulation, Excise Tax Designated Zones that do not follow to the set conditions and standards will hereafter be classified as a portion of mainland UAE for the drives of Excise Tax regulation compliance.
Excise Tax Relief for Products Prone to Natural Shortages
According to Article 12 (5) (b) of the Amended Excise Tax Regulation, there is a reviewed definition of Excise Goods not being classified as “free for consumption” in cases of natural lack, provided explicit standards are met.
This adjustment holds noteworthy inferences, especially for producers of Excise Goods working within designated zones, particularly those in the tobacco industry. These producers have met contests regarding product reduction or moisture loss during storage. It is vital to highlight that this amendment exclusively relates to naturally occurring deficiencies in products. Reporting other lacks or consumption during manufacturing procedures remains obligatory under this regulation regarding excise tax compliance in the UAE.
Excise Tax Deductions Applicable to Exported Goods
In compliance with Article 16 of the Amended Excise Tax Regulation, the aptness for Deductible Excise Tax regarding exported Excise Goods now line up with the evidentiary requisites similar to those governing the exemption of exported goods. This revolution safeguards constancy in evidentiary protocols for both deductions and exemptions within the context of excise tax in UAE.
Reimbursement for Exports of Excise Goods by Non-Taxable Entities
Under Article 22 of the Amended Excise Tax Regulation, entities not considered as taxable persons for Excise Tax in the UAE can now pursue a refund for Excise Tax compensated on goods exported from the state.
- This instruction, operative from June 1, 2024, is reliant upon meeting specified evidentiary obligations. The adjustment is mainly auspicious for traders dealing in Excise goods destined for export.
- It allows them to apply for an Excise Tax refund, a privilege earlier limited to entities obliged to register for Excise Tax due to import, manufacture, or goods release from designated zones.
These amendments signify a considerable transformation in the UAE Excise Tax landscape. While line up with recognized FTA practices during Excise Tax Audits, the amendments also recognize the need to address compliance challenges confronted by businesses. In compliance with these amendments, businesses are advised to reconsider their working and compliance strategies to ensure configuration with the developing regulatory framework of Excise Tax Dubai.
Conclusion
The recent revisions to the Excise Tax regulations in the UAE signify a pivotal change in the financial realm. These changes not only enhance the compliance framework but also present new opportunities for businesses to strategically oversee taxation. A comprehensive grasp of the updated regulations is now essential for navigating the intricacies of Excise Tax. As businesses acquaint themselves with these amendments, seeking expert guidance becomes imperative. Farahat & Co. recognized as one of the premier audit firms in Dubai, is well-prepared to assist in ensuring unified compliance and fostering strategic financial growth. Thus, contact us today and we shall be glad to assist you.
FAQs
What is the excise tax in UAE?
Excise tax in the UAE is a duty levied on explicit goods measured as harmful, such as tobacco, energy drinks, and sentimental beverages. Charged at rates up to 100%, it proposes to control the usage of these items while producing revenue for community welfare initiatives and organization development.
What is the threshold limit for VAT in UAE?
Businesses must register for VAT if it is listed in the UAE and the annual turnover surpasses AED 375,000. This is based on the revenue actions over the last 12 months, or if the company expects to exceed the limit in the subsequent 30 days.
How to file excise tax in UAE?
The steps to file excise tax in UAE are;
- You can go to "EmaraTax" Register or log in by UAE ID Pass or FTA account.
- Add your business particulars or information and Business activities.
- Click on Excise Tax.
- Evaluate and assert your Excise Tax Returns.
What is zero-rated VAT in UAE?
A 0-rated tax is functional for taxable materials at 0%. These goods should be professed in the VAT returns that are deferred to every tax period. A 0-rated VAT is imposed for goods and facilities that are exported outside of the UAE. It ensures that authorized documents of the export can be submitted.
What is the percentage of customs duty in UAE?
Customs duties are levied on imported goods charged on an ad-valorem basis. A 5% duty is compulsory on goods imported from out of the country not including goods in transport to GCC countries.
