Excise Tax UAE: Everything You Need To Know

Domestic Excise Tax Law was introduced by the United Arab Emirates in 2017. The import and production of certain goods are liable to tax. As per this, the business people have to pay tax if the excise products are transported from certain zones. Owing to this, companies should have proper knowledge of excise tax in the UAE for effective compliance.

It is imperative to understand that imposition of the excise tax in the UAE is made on the recommendation of the Gulf Cooperation Council. All Gulf States are required to implement various policies to deploy the taxation system. Consequently, the Value Added Tax is deployed in the country.

In case you are looking for establishing a business in the UAE or already have a small business setup in Dubai, you need to have comprehensive knowledge of taxation. So, the post is designed to help you get A-Z guidance!

What is the excise tax?

Excise tax is referred to as a type of tax imposed on a specific category of goods indirectly. For instance, products that are not good for the environment or human health are categorized in this listing. So, how can you identify if a product is liable to excise tax or not? Consider the given illustration:

1) Carbonated drinks including aerated beverage with concentrations, gel, or powder ingredients except for unflavored aerated water

2) Energy drinks that contain stimulant ingredients and substances to activate physical or mental stimulation. The energy drink has taurine, caffeine, guarana, and ginseng.

3) All products containing less or more quantity of tobacco are included in the list of excise tax.

Additionally, electric smoking tools and devices and sweetened drinks are also included in the list from 1 December 2019.  The tax is charged indirectly, so the manufacturers have to calculate the ratio of tax to be added in the price. Here are given the rates as per Cabinet Decision No, 52 of 2019.

1) 50% on carbonated beverages and drinks

2) 100% of tobacco goods

3) 100% on energy beverages and drinks

4) 100% on electronic devices used for smoking

5) 100% on flavors and liquids added to smoking devices

6) 50% on any product with added sugar or other sweeteners.

The primary objective of excise tax

The primary purpose of imposing a 50-100% tax on these products is to discourage people from buying products that are not good for health. The harmful substances and unhealthy commodities are sold at high prices that let the people use such products in a limited quantity.

On the other hand, the government also raises revenue from the product and sales of these products, which is later spent on the betterment of citizens. Consequently, it’s a win-win for both the state and the consumers at large.

Type of businesses liable for excise tax

Who is the targeted audience? It is imperative to understand that companies dealing with the businesses of beverages, drinks, and tobacco products need to register for domestic excise tax. According to the Federal Decree-Law No. 7 of 2017 under the UAE excise law, following businesses should register:

1) Companies importing goods liable to excise tax in the UAE

2) Companies producing and releasing excise good in the UAE market

3) Companies responsible for managing inventory and stockpiling the excise goods

4) Individuals accountable for supervising stocks of excise goods in designated zones

Hopefully, you have got a fair idea of what, why, and who need to comply with the newly introduced excise tax in the UAE along with the other Gulf States. The companies that failed to comply with the laws may have to face VAT penalties. So, beware of it.

How to register for excise tax?

Federal Tax Authority can review the tax documents of the companies to ensure VAT compliance. In case of any confusion, you can get assistance from the best VAT consultancy in Dubai for comprehensive guidance understand your responsibilities regarding excise tax. Once, you are ready, here is the process:

Account Creation on e-Services

The process of excise tax registrations is simple as the companies need to sign up on the e-Services provided on the website of the Federal Tax Authority. In this way, you will be able to create an account for the submission of tax documents.

Documents required for registrations

Once the business owner has complete the creation of an account on the FTA website, it is time to provide business details. Therefore, you have to consider the role for which you have registered, such as importer, supplier, or manufacturer. Besides this, provide the detail of Customs Authority registration along with the TRN and other excise tax documents required by the Federal Tax Authority.

Methods of charging tax

The companies liable to excise tax can select a suitable method from the all available ways to pay the tax. One way is to pay tax using Ad-valorem in which a certain amount of the total product value is charged in percentage. The other way is known as a specific excise tax in which tax is charged irrespective of the weight or price but on quantity.

Feel overwhelmed? Get VAT Expert Services!

All the members of the Gulf Cooperation Council have mutually agreed to implement modern tax policies in their countries. As a response, UAE has started the deployment of the excise tax to comply with the agreement with GCC. As a result, the companies dealing in specific industries have to comply with VAT as per the guidelines of the Federal Tax Authority.

Remember! Any negligence or misinterpretation of financial records or tax documents may cause severe issues for your company. So, understand the process and follow the guidelines comprehensively to ensure successful compliance.

In case you are facing any trouble in dealing with the requirements of business documents management and submission or calculation of tax amount, you can get assistance from our VAT experts.

Contact us today to book a consultancy session online for understanding the process, starting from account creation to the selection of the tax submission method wisely. We save your back when it comes to taxation!