Excise tax in U.A.E – FAQS
1. What is Excise tax in U.A.E ?
Excise tax is a form of indirect tax levied on specific goods. These goods are typically those that are harmful to human health or the environment. The intent of the tax is to reduce consumption of these commodities while also raising revenues for the government that can be spent on beneficial public services. Excise tax comes into effect on 1 October 2017 as per Federal Decree-Law No. (7) of 2017 on Excise tax.
2. What are Excise goods ?
Carbonated drinks, energy drinks and tobacco products are Excise goods.
- Carbonated drinks include any aerated beverage except for unflavored aerated water. This also includes any concentrations, powder, gel, or extracts intended to be made into an aerated beverage.
- Energy drinks include any beverages which are marketed, or sold as an energy drink, and containing stimulant substances that provide mental and physical stimulation, which includes without limitation: caffeine, taurine, ginseng and guarana. This also includes any substance that has an identical or similar effect as the aforementioned substances. Any concentrations, powder, gel or extracts intended to be made into an energy enhancing drink also constitute energy drinks.
- Tobacco and tobacco products include all items listed within Schedule 24 of the GCC Common customs tariff.
3. What are the Excise tax rates in the UAE ?
Excise goods are subject to the below excise tax rates.
Carbonated drinks – 50%
Energy drinks – 100%
Tobacco – 100%
4. How to calculate Excise tax ?
Excise Tax will be applied to the Excise Price of the goods i.e. the tax base
The Excise Price will be the higher of:
- The price published by the FTA in a standard price list; or
- Designated Retail Sales Price of the goods, less the excise tax applicable.
5. Who is required to register for Excise tax?
Any person who is engaged in activities relating to excise goods such as:
a. Production of excise goods in the state, where such production was in the course of doing business.
b. Import of excise goods.
c. Release of excise goods from a designated zone.
d. Stockpiling of excise goods in the state, where such stockpiling was in the course of doing business.
In case one is not a producer or importer of excise goods, he may still be required to register in case where excise goods have been piled up prior to the introduction of the tax, or in case excise goods are released from a designated zone and one is not already registered for Excise tax.
6. What is the threshold registration for Excise Registration ?
There is no threshold requirement below which one is not required to register for Excise tax. However, one may be eligible for an exception from registration where the Federal Tax Authority (“FTA”) is satisfied that he does not import excise goods or release excise goods from designated zones on a regular basis.
7. What happens if a person dealing in excisable goods does not notify FTA for registration?
If a person fails to notify FTA of a requirement to register for excise tax within the specified timeframe, the FTA may issue a tax assessment to collect any potentially underpaid excise tax and would also be charged an administrative penalty. Businesses involved in the import and production of excise goods will not be authorised to conduct such activities without being registered for excise tax.
8. What is Import and who is an importer ?
The arrival of goods from abroad into territory of the state is termed as import.
The person whose name appears for customs clearance purposes as the importer of excise goods on the date of import is termed as an importer. These would include a person who imports excise goods as defined under excise goods.
9. What is a Designated Zone ?
Any fenced area intended to be a free zone that cannot be entered or exited except through a designated road, and any area designated by the Authority as being subject to the supervision of a Warehouse keeper is a designated zone. Eg. Jebel Ali Free Zone, SAIF Free Zone. Tax is not due on excise goods until they leave the designated zone or when they are introduced for consumption – even if sold in a free zone. A designated zone shall be treated as outside the UAE for excise tax purposes.
10. Who is a Warehouse Keeper ?
Any person approved and registered at the Federal tax authority to supervise a designated zone in accordance with the Executive Regulation of Federal Decree-Law No. (7) of 2017 on Excise tax is called as warehouse keeper.
11. Who is a Stock piler ?
A stock piler is considered to be someone who owns excise goods which are held in free circulation in the course of doing business in the UAE where tax on those goods has not been previously paid, relieved, remitted or deferred.
12. When to account for Excise tax ?
Excise Tax shall be calculated (i.e. included on the Excise Tax return) based on the dates below:
Art At the date of import of the excise goods
o At the date on which the excise goods were acquired by a stockpiler (or the effective date of the Decree-Law if later)
o At the date on which the excise goods were released for consumption i.e. produced or released from a designated zone.
13. What declarations are required to be filed in order to account and pay Excise tax?
A number of declarations will be required to be filed in order to declare and pay excise tax. Declarations will be required in following situations:
Import of excise goods
Production of excise goods
Release of excise goods from a designated zone
Transfer of excise goods from a designated zone
All declarations must therefore be completed prior to submission of the tax return. The excise tax return will be auto-populated based on the declarations submitted for that tax period.
14. When should a taxable person file a return ?
The taxable person should submit the excise tax return and complete the payment of the tax liability due by the filing deadline of the 15th of the month following the end of the tax period.
15. What Excise tax records should be maintained ?
Every taxable person should maintain the following records:
a) Records of all produced, imported or stockpiled excise goods;
b) Records of exported excise goods and evidence of such export;
c) Records of stock levels, including details of lost or destroyed items;
d) Records of excise goods transferred to and from designated zones.
e) A tax record that includes the following information:
- Due tax on imported excise goods.
- Due tax on produced excise goods.
- Due tax on excise goods that have been stockpiled.
- Deductible tax.
16. Would samples of Excise goods be subject to Excise tax ?
Samples of excise goods that are given away for free will also be subject to excise tax. Excise tax is due on the goods when they are released for consumption (i.e. enter free circulation) in the UAE, regardless of whether or not they are intended for sale.
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