The UAE Excise Tax is an indirect tax implemented by the United Arab Emirates to discourage the consumption of harmful goods and to promote public health. It was introduced on October 1, 2017, and is applicable to certain goods considered harmful to health and the environment.
Cabinet Decision No. 37 of 2017 serves as a foundation, providing the executive regulations for the Federal Decree-Law No. 7 of 2017 on Excise Tax. It sets out the framework for the implementation and regulation of Excise Tax in UAE. Key highlights include definitions and the scope of excise goods, designated responsibilities for warehouse keepers, tax calculation methods, compliance and penalty mechanisms.
Cabinet Decision No. 108 of 2023 provides critical updates to the Executive Regulation of the Federal Decree-Law No. 7 of 2017 on Excise Tax in the UAE.
Key Points about UAE Excise Tax:
1.Goods Covered:
Tobacco and Tobacco Products.
Energy drinks.
Carbonated drinks.
Sweetened drinks.
Liquids used in electronic smoking devices and tools.
Electronic smoking devices and tools
2.Excise Tax Rates in the UAE:
As per Cabinet Decision No. 52 of 2019 on Excise Goods, Excise Tax Rates are as follows:
50 per cent on carbonated drinks.
100 per cent on tobacco and tobacco products.
100 per cent on energy drinks.
100 per cent on electronic smoking devices and tools.
100 per cent on liquids used in electronic smoking devices and tools.
50 per cent on sweetened drinks.
These taxes are in addition to the regular VAT.
3.Objective:
The main goal of the excise tax is to reduce the consumption of harmful products and to generate revenue for the government.
4.Implementation:
The excise tax is applied at the manufacturing or importation level, meaning that the tax is levied on producers and importers, who then typically pass the cost onto consumers.
5.Tax Registration:
Businesses involved in the production, importation, or stockpiling of excise tax goods are required to register with the Federal Tax Authority (FTA) and comply with tax regulations. The Authority may exempt a person from Tax Registration under certain circumstances.
6.Compliance and Reporting:
Registered businesses need to pay excise tax and file excise tax returns periodically and ensure proper record-keeping to comply with UAE tax laws.
7.Penalties:
Non-compliance with excise tax laws can result in hefty fines which includes penalties for late registration, false declarations and late payments.
8.Impact:
The introduction of excise tax has led to increased prices for affected goods, and there has been an emphasis on the promotion of healthier alternatives.
As the UAE continues to diversify its economy and reduce reliance on oil revenues, the excise tax/VAT is part of broader reforms to enhance tax collection and promote sustainability.
For the most current and specific regulations, businesses and individuals are encouraged to consult the Federal Tax Authority or professional tax advisors in the UAE.
As the landscape of excise tax regulation evolves, it is imperative for stakeholders to understand these changes and ensure compliance to avoid penalties and maintain operational efficiency.
Keep following our page and website for further updates on this law.
Disclaimer:
This content is not a legally binding document but is intended to provide assistance in understanding the Excise Tax law. While we have made every effort to ensure the accuracy and reliability of the information presented, tax laws and regulations are subject to change and interpretation. This content is written in general terms and does not constitute any form of advice or recommendation by M&M and therefore cannot be relied upon to cover specific situations. We recommend that you obtain professional advice before acting or refraining from acting on any of the contents of this publication. We do not assume any liability for actions taken /not taken based on the information provided in this update. Our update is not binding on any regulators and there can be no assurance that the regulators will not take a position contrary to our comments. We do not take any responsibility with regard to any different view/approach taken by the UAE Federal Tax Authority.