Excise tax is levied on such goods that have been identified as having negative impacts on human health or the environment such as carbonated drinks and tobacco. The excise tax is levied on the import and production of excise goods. The excise tax is also applicable to the stockpiling of these goods in the UAE. This article explains the deductibility of excise tax in UAE, including the conditions and procedures, adhering to the specifications stipulated in Cabinet Decision No.52 of 2019 and Federal Law No.7 of 2017 that was recently amended vide Ministerial Decision No. 108 of 2023 issued in November 2023.
When Excise Tax Is Deducted by Taxable Entity?
All excise products do not fall under the purview of excise tax in UAE. There are some situations where a taxable person can deduct the tax that was previously paid on the same goods. A taxable entity refers to an individual engaged in economic activities for income generation, registered or obligated to register for excise tax in the UAE. An Eligible taxpayer can deduct the excise tax on their tax return if they meet the requirements stated in Article 16 of the Decree-Law. This deduction can be claimed for the period when the right to deduct the tax first arose. The deductible tax value mirrors the tax amount previously paid for the same goods. For example, if a taxable person imports excise goods pays the excise tax at the customs, and then exports the same goods to another country, he can deduct the tax that he paid at the customs on his tax return.
Eligibility Criteria for Deductions: –
To be eligible for a deduction, the taxpayer must provide evidence validating the previously paid tax amount on corresponding excise goods. It is the right of the Federal Tax to specify the procedure for submission of relevant supporting documents. If the tax on the excise goods was settled by another entity in the supply chain, the taxable entity must retain the following documentation as proof of the prior tax payment:
- A copy of the purchase invoice for the excise goods,
- Confirmation from the supplier verifying the tax payment and its amount, and
- The documents provided to the FTA prove that the excise goods eligible for deduction are the exact goods that were previously taxed.
How to comply with payment rules and Stockpiling Regulations for Excise Tax in the UAE
