Excise Tax UAE
The UAE government introduced excise tax on carbonated drinks, tobacco products and energy drinks in 2017 and has decided to charge the same on e-cigarettes, e-liquids and several soft drinks, commencing from December 1, 2019.
Excise tax is levied on specific goods that are harmful to human health or the environment. The UAE Government is levying excise tax to reduce consumption of unhealthy and harmful commodities, simultaneously raising government revenues that can be used for public services.
Excise Tax in UAE
The excise goods that will be charged tax in the UAE include;
Tobacco and Tobacco products
Any products that fall under Schedule 24 of the GCC Common Customs Tariff, including electrically-heated cigarettes, will be categorized as tobacco and tobacco products. These products include:
- Chewing tobacco
- Cigarette rag
- Expanded tobacco
- Hand rolling tobacco
- Herbal smoking products
- Reconstituted tobacco sheets
This includes any aerated beverage and any concentrations, powder, gel, or extracts intended to be made into an aerated beverage. Unflavored aerated water is exempted.
Any beverages which are marketed, or sold as an energy drink, and contains stimulant substances that provide mental and physical stimulation or includes caffeine, taurine, ginseng and guarana, will fall in this category. Substances that have similar effects as the ones mentioned above and any concentrations, powder, gel or extracts intended to be made into an energy enhancing drink will also be levied tax.
Electronic smoking devices and tools
Electronic smoking devices and tools shall include all electronic smoking devices and tools and the like, whether or not containing nicotine or tobacco. which would be classified on import under Customs HS codes:- 85437031, 85437032, 85437039
All liquid used in electronic smoking devices and tools used in such devices even if they contain nicotine or not will be levied tax under Customs HS codes:- 38249999.Electronic smoking devices,liquids used in this devices and tools will be charged 100 percent tax.
Sweetened drinks that come under excise tax include any product to which a source of sugar or sweetener is added and is produced either as:
- A ready to drink beverage or
- Concentrates, powders, gel, extracts or any other similar product that can be made into a sweetened drink
Source of sugar includes white sugar, soft white sugar, powdered sugar, soft brown sugar and glucose syrup. Whereas sweeteners include saccharin and its salts, aspartame, sorbitol, and neotame.
Sweetened drinks that are excluded from Excise Tax
- Ready to drink beverages that contain at least 75% milk or its substitutes
- Baby formula, follow up formula or baby food
- Handling of Foods for Special Medical Purposes
- consumed for special dietary needs
- Beverages which include alcohol
- 50 per cent for carbonated drinks
- 100 per cent f or tobacco products
- 100 per cent for energy drinks
- 100 per cent on liquids used in electronic smoking devices and tools
- 100 per cent on electronic smoking devices
- 50 per cent on any product with added sugar or other sweeteners.
What Business Needs to do
The Federal Decree-Law No. 7 of 2017 on Excise Tax stipulates that businesses/ persons that are engaged in any of the below activities must register for tax;
- Importing of excise goods;
- Production of excise goods;
- Releasing goods from an excise tax designated zone;
- Stockpilers of excise goods, in certain cases; and
- Warehouse keepers, in certain cases.
Hence accordingly Importers, producers, stockpilers warehouse keepers, etc. of electronic smoking devices, liquids used in such devices and sweetened drinks need to register for excise tax system as soon as possible. Failure in registering within the specified time period can lead to fines and various other obstacles.
Stockpilers are that businesses that holds excise stock on which duty is not paid and it’s available for free circulation in UAE and intends to be sold in UAE and holds “Excess excise goods”. FTA has a prescribed method to calculate excess excise goods and their valuation. Most of the supermarkets and retailers may fall under this category.
A step-by-step guide for businesses concerned
- Classification of Goods – Identify the Excise Goods
- Identify the primary conditions for registration as an Excise Tax Taxable Person and if applicable, as a Tax Warehouse and Tax Warehouse Keeper
- Identify the tax trigger points and the tax liability for flow/transaction after going through the supply chain flows/transactions with regard to the Excise Goods
- If there is any additional excise tax during the transitional period, this must be calculated.
- Evaluate the pricing impact across the supply chain
- Valuation for Excise tax
- ERP and process readiness
Services offered by HLB HAMT
- Registration for excise tax in UAE
- Quick review on the Entity to identify the product listing and classification for qualifying registration
- Advise on stock/inventory counting and duty calculation
- Advise on stockpilers
- Ongoing Excise duty return filing and compliance services
- Tax Agent
- Excise duty consultancy on latest amendments/updates from FTA
Latest insights, case studies and news from across the network
HLB Monthly Insights
Monthly Tax insights and updates - July 2022
You can read the most latest news developments affecting tax-related issues in the United Arab Emirates and around the Middle East Region in our July 2022 edition of HLB HAMT’s...
VAT Public Clarification On Gold-Making Charge in UAE
The supply of the making services does not fall under the special reverse charge mechanism under Cabinet Decision No. 25 in cases of multiple supplies.
VAT Transactions between UAE branch and foreign Head Office
Article 1 of the VAT Decree-Law defines a person as a natural or legal person…