The United Arab Emirates (UAE) is known for its business-friendly tax system, which is straightforward and appealing to foreign investors and entrepreneurs. Understanding the local regulations and tax system in the UAE is crucial for individuals and entrepreneurs to ensure legal compliance and maintain ethical standing. Taxes such as value-added tax (VAT), corporate tax, and excise tax are managed by the federal UAE government. However, certain Emirates may also impose additional taxes, like those on property or tourism.
In this blog, you will get a complete overview of excise tax in UAE.
Back to topWhat is Excise Tax?
Excise tax is a type of indirect tax imposed on products that can negatively impact human health or the environment. In the UAE, the excise tax was first introduced in October 2017 through the Federal Decree-Law No. 7. This tax applies to items such as tobacco and related products, energy drinks, and carbonated beverages, which are often referred to as excise goods. However, in December 2019, the UAE government broadened the scope of excise tax under the UAE tax law by including more products like carbonated drinks and sugared products.
Back to topExcise Tax Rates in UAE
The excise tax in UAE is applicable at these rates to the following products:
|
Goods |
Tax Rate |
|
Tobacco Products |
100% |
|
Electronic smoking devices |
100% |
|
Energy Drinks |
100% |
|
Carbonated drinks |
50% |
|
Food and beverages with added sugar |
50% |
Note: These rates are updated according to Cabinet Decision No. 52 of 2019.
Back to topExcise Tax vs VAT in UAE
Most individuals often need clarification on VAT and excise taxes before setting up a business in the UAE. Let us look at the differences between these two indirect taxes:
|
Aspects |
VAT |
Excise Duty |
|
Definition |
VAT is an indirect tax imposed on the consumption of goods. |
Excise Duty is applicable to the use of harmful goods like tobacco, sugary products, and more. |
|
Purpose |
VAT in UAE was introduced in January 2018 to diversify the government's revenue sources.
|
Excise duty in UAE aims to promote public health and sustainability. |
|
Rate |
It has a standard rate of 5% |
It varies depending on the type of goods |
|
Reporting Deadline |
You can file VAT returns within 28 days from the end of your tax period. |
You must file the excise tax returns within 15 days of the end of your tax period. |
|
Registration |
Corporations with a turnover of more than AED 375,000 in a financial year must register for VAT in UAE. |
Registration is not needed if you are not dealing with excise products.
|
Who Needs to Pay the Excise Tax in UAE?
Any business involved in the following activities must register for excise tax in UAE:
- Importing excise goods in the UAE
- Producing excise goods within the UAE
- Stockpiling excise products in UAE
- Selling or distributing excise goods within the UAE
- Individuals or organisations providing warehouses or designated zones for excise products.
How to Pay Excise Taxes?
The UAE Federal Tax Authority offers e-services through its website to simplify the excise tax registration process. You must register and submit all the required declaration forms by the end of the tax period. The excise tax liability is automatically populated based on the information provided on the declaration forms.
Additionally, you can use the EmaraTax platform to access e-services, making it easier to file returns, pay taxes and obtain returns.
Back to topWhy Commitbiz?
We have a team of experienced tax consultants in UAE who specialise in streamlining tax regulations and ensuring legal compliance. Commitbiz has been a trusted corporate service provider for over 17 years, helping entrepreneurs achieve their business goals. Our consultants provide end-to-end support, from tax consultancy to intellectual property registration. Contact us to learn more about our services and make your business dreams a reality!
Back to topWhat are the different declaration forms for excise tax registration?
Some of them include the import declaration form for excise goods, deductible excise tax declaration form and production declaration form for excise goods, among others.
What does the term ‘stockpiler’ refer to?
A stockpiler refers to an individual or an entity that holds a stock of excise goods for commercial purposes and cannot demonstrate that the excise tax has been paid on these goods.
How long must businesses maintain records of excise goods transactions in the UAE?
Businesses are required to maintain records of excise goods transactions related to production or import for seven years.
