All You Need to Know About Excise Tax in the UAE

by Zaara 09, Oct 2017

News for consumers of sugary/caffeinated drinks or cigarettes: starting 1st October 2017, excise tax has been introduced in the UAE by the Federal Tax Authority (FTA). This would be at the rate of 100% on tobacco products and caffeinated drinks, and 50% on sugary drinks, implying that the price of the former would double and the latter would become 1.5 times.

For businesses, this implies a regulatory change since all compliance requirements called for by the FTA would have to be adhered to. Tax consulting in Dubai and the UAE should be resorted to since FTA holds the authority to carry out audits of taxable firms accountable for filing and paying the excise tax and impose penalties in case of anomalies.

Here’s all you need to know about the topic.

What is the excise tax?

An excise tax is an indirect tax (not directly paid by an individual customer) levied on the sale of particular goods. Generally, governments levy excise tax on items having a high social implication, like alcohol and cigarettes, hence this tax is also referred to as ‘sin tax’.

What shall be subject to excise tax in the UAE?

Excise tax in the UAE shall be applicable on the following three categories of products:

  • Tobacco Products: All items listed in Schedule 24 of the GCC Common Customs Tariff
  • Energy Drinks: Beverages marketed or sold as energy drinks, containing mentally or physically stimulating substances like caffeine, ginseng, taurine and guarana
  • Carbonated Drinks: Aerates drinks, with the exception of sparkling water

What all would be exempted from excise tax?

Everything apart from the products falling under the aforementioned 3 categories would not attract excise tax.

What shall be the rate of excise tax in the UAE?

The rate of excise tax applicable would be:

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

From when is excise tax being levied in the UAE?

Excise tax shall come into effect across the UAE in the fourth quarter of 2017, i.e. from 1 October 2017.

Why are some outlets still selling tobacco products or energy/carbonated drinks at the old price?

As per law, retailers are allowed to sell their existing stock, purchased prior to 1 October 2017, without adding an excise tax to it. So the old prices may be visible for a few days at some shops. But in due time, all these items would be listed as per the new ruling.

Why has this tax been introduced?

The UAE government has levied an excise tax to discourage the consumption of harmful products by the people as well as to raise additional revenue for government coffers to be utilized on public services.

What should businesses do?

Any business in the UAE dealing with excisable goods should check if they need to be registered with the FTA and required to file and pay excise tax. Any legal implications on the same can be found in the Federal Decree Law No. 7 of 2017. It is the responsibility of businesses to ensure that all regulatory requirements pertinent to excise tax are in place.

With the dawn of excise tax from 1st October 2017, firms in the business of excisable goods would have to consider registration for an accounting of excise tax. We at Commitbiz have our team of experts to help you with tax consulting. Should you have any queries on how to be in sync with tax and compliance regulations, do contact us, even if it’s just for friendly advice.