Excise Tax in the UAE – What you need to know

Jay Krishnan, Partner

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The UAE government is continuing to show leadership when it comes to clamping down on unhealthy products being produced for human consumption following its decision to double the number of products that will now be subject to excise tax.

In 2017, more than 1700 products were subjected to this new excise tax with 60% of them being fizzy soft drinks, 26% were tobacco products and 14% were energy drinks.

However, in December 2019, the UAE government decided to bolster its campaign by doubling the amount of produce that will be subject to increased taxes. Partner at HLB HAMT, Jay Krishnan said, “The excise tax was first introduced on 1700 products in 2017, as part of the UAE government’s objective which was to ultimately reduce the consumption of carbonated energy drinks and cigarettes.”

The primary objective of this health initiative being spearheaded by the UAE is to ultimately reduce the consumption of unhealthy and harmful commodities. There is a lot of consumption of carbonated drinks, energy drinks-and tobacco products in the UAE, and the government are attempting to reduce the consumption of these products, but the other benefit of the excise tax on these products is the fact it’s going to generate additional revenue,” says Krishnan.

Facts: Introduced in Oct. 2017, based on GCC Common excise introduction rules.

Purpose:

  • To reduce the consumption of harmful and unhealthy commodities.
  • Additional revenue raising.

Who are required to register for excise tax?

  • Importer of excise goods.
  • Manufacturers.
  • Stockpiles.
  • Warehouse keepers – distributor from a designated zone.

No registration threshold limit Products included under excise duty:

  • Carbonated drinks.
  • Energy drinks.
  • Tobacco and tobacco products.

Advancement: 1.12.2019

  • All sweetened drink with added sugar is included under excise tax.
  • Electronic smoking devices and tools, liquids etc.

Rate of Excise tax:

  • 50% on carbonated drinks.
  • 50% on any drink with added sugar.
  • 100% on tobacco and tobacco products.
  • 100% on energy drinks.
  • 100% on liquids used in smoking devices.

What is sweetened drink:

  • Source of sugar or other sweeteners is added and ready to drink beverages.
  • Any gels, powders which can be convertible to sweetened drinks. Exclusion from sweetened drink –any drink containing at least 75% of milk. Milk substitute, baby formulas, baby food.

From 01.12.2019 – minimum excise tax is fixed:

  • 0.40 AED on individual cigarettes.
  • 0.10 AED per gram of water pipe tobacco or similar products.

On 01.10.2017 – more than 1700 product items were subject to excise tax (60% are soft drinks, 26% tobacco products and 14% energy drinks)

  • Now after the advancement, this number will more than double.

Step by step guide for businesspersons:

  • Classification of goods.
  • Identify excisable goods.
  • Registration with FTA.
  • Identify tax trigger points and tax liability.
  • Evaluate pricing impact.
  • ERP and process changes to be implemented.

What HLB Hamt offers:

  • Registration.
  • De-registration.
  • Goods classification, qualifying for excise tax.
  • Inventory counting.
  • Advise on stockpiles.
  • Ongoing return filing and compliance services.
  • Tax agent.
  • Consulting on latest amendments.

Books of accounts and record maintenance is mandatory for 5 years from the financial year.

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