All about Excise Tax in the UAE

The UAE introduced the Excise Tax in the year 2017 across the Emirates. It refers to the indirect tax levied on specific goods that are typically harmful to human health and the environment. These goods are referred to as “excise goods”.

In 2019, the Federal Tax Authority (FTA) announced new rates for excise tax in the UAE and even expanded the list of excise goods. This increase in excise rates in the UAE was launched to support the government’s efforts to improve public health and prevent chronic diseases directly linked to sugar and tobacco consumption.

Which Excise Goods are Levied under the UAE Excise Tax Law?

When analysing whether a product is an excise good, the following definitions apply:

• Carbonated drinks incorporate any aerated beverage except for unflavoured aerated water. Also considered carbonated drinks are any concentrations, powder, gel, or extracts meant to be made into an aerated beverage.
• Energy drinks include any liquids which are marketed, or sold as an energy drink and carrying stimulant substances that provide mental and physical stimulation, which includes without limitation: caffeine, ginseng, taurine, and guarana. This also involves any substance that has an identical or similar effect as the substances above. Also considered to be energy drinks are any concentrations, powder, gel or extracts intended to be made into an energy-enhancing drink.
• Tobacco and tobacco products include all items listed within Schedule 24 of the GCC Common Customs Tariff.

Which Products are Exempt from the Excise Tax?

Beverages that are not included in the new tax include:

• Ready-to-drink drinks comprising at least 75% milk or milk substitutes
• Baby food or baby formula
• Beverages consumed for special dietary needs, as determined under Standard 654 of the GCC Standardization Organization under the heading ‘General Requirements for Pre-packaged Foods for Special Dietary Use’ and any succeeding and relevant standards
• Beverages consumed for medical uses, as determined under Standard 1366 of the GCC Standardization Organisation under the heading ‘General Requirements for Handling of Foods for Special Medical Purposes’, and any subsequent and relevant standards

How much Excise Tax is Applicable?

The new UAE excise rates that came into effect from 2020 are as follows:

• 50% for carbonated drinks
• 100% for energy drinks
• 100% for products containing tobacco

Who can pay the Excise Tax?

An individual must register and pay excise tax if they are involved in the following activities:

• Importing excise products.
• Transferring excise products out of a Designated Zone.
• Producing or manufacturing excise goods.
• Stockpiling excise goods in the ordinary course of business.
• Selling excise goods in the UAE. The seller will bear the excise tax, and the total sale price of the excise product will include the tax amount.

Excise Tax for Businesses in the UAE

Due to new laws introduced, businesses, importers, warehouse keepers, stockpilers, and manufacturers must register their UAE excise goods in the new system introduced by FTA. And companies who are already registered for excise tax returns in the UAE will need to re-register their items.

Excise tax registration is compulsory for all businesses dealing with excise goods in the UAE. The process can quickly be done through the e-services section on the FTA website. All you need to do is log in or sign up with your information on FTA excise tax portal and follow the instructions they have there.

How can we help?

Introduction of Excise & VAT taxes added newer responsibilities for businesses. We at Commitbiz can make the process hassle-free for you. Get in touch with our consultants today!