The UAE implemented an excise tax on specific goods detrimental to health since October 1, 2017, targeting items like energy drinks, tobacco, and certain electronic smoking products. The goal is to promote a healthier society, reduce health-related costs, and boost government revenue. This tax affects both businesses and consumers, as businesses must comply with applicable rates, passing the tax burden to consumers through increased prices. Businesses must submit excise tax payments to the Federal Tax Authority, obtaining an Excise Tax Registration Certificate to avoid severe penalties for non-compliance. Adherence to the excise tax framework is crucial for businesses.
What is Excise Tax in UAE?
Excise Tax is an indirect tax imposed on harmful goods in the UAE, including:
- ✔ Tobacco products: 100% tax
- ✔ Energy drinks: 100% tax
- ✔ Carbonated drinks: 50% tax
- ✔ Electronic smoking devices: 100% tax (since 2020)
Excise Tax Rates in the UAE
Excise tax rates in the UAE vary depending on the nature of the product. For instance, tobacco products incur a 100% tax, carbonated drinks face a 50% tax, and electronic smoking devices and liquids are subject to a 100% tax rate.
According to Cabinet Decision No. 52 of 2019 on Excise Goods, Excise Tax Rates, and Methods of Calculating Excise Price, the following rates are applicable:
- Carbonated Drinks: 50%
- Tobacco Products: 100%
- Energy Drinks: 100%
- Electronic Smoking Devices: 100%
- Liquids used in E-cigarettes and other devices: 100%
- Products with added sugar or sweetener: 50%
Purpose of Implementing Excise Tax in UAE
The implementation of the excise tax UAE has a two fold objective. Primarily, it seeks to reduce the consumption of unhealthy products such as tobacco and energy drinks. Secondly, it plays a crucial role in fostering economic growth and strengthening public finances. By raising the prices of these items, the tax discourages their purchase, encouraging healthier lifestyle choices. Furthermore, the government's imposition of a 20% tax on the import of specific goods underscores its dedication to diminishing the consumption of these items and generating additional revenue.
What Goods are Subject to Excise Tax in UAE?
A wide array of products falls under the excise tax law in the UAE, including sweetened beverages, energy drink ingredients, and tobacco-related items. The tax is levied on any product that poses a threat to the environment or health.
Exemptions from Excise Tax in UAE
While certain items are subject to excise tax, there are exemptions. Products such as bottles of milk, milk substitutes, and specific medical beverages are not subject to the excise tax in the UAE.
Excise Tax Registration for Businesses
Businesses operating in the UAE must adapt to the changes brought about by the excise tax. The registration of excise items in the FTA system is essential. The registration process, carried out in two phases, covers sweetened drinks in the first phase and e-cigarettes, smoking devices, and liquids in the second.
Read more: Corporate Tax Deregistration for Natural Persons in the UAE
Registering for Excise Tax in UAE
Businesses looking to excise tax registration UAE can do so by creating an account on the FTA's online services. For inquiries or assistance, they can contact the Federal Tax Authority through the provided channels.
Ensuring adherence to excise tax regulations is crucial for businesses in the UAE, as failure to comply may result in severe penalties. Businesses must diligently submit excise tax payments to the Federal Tax Authority (FTA) and secure the required Excise Tax Registration Certificate. Neglecting these obligations could lead to substantial financial consequences and legal issues. Staying informed about requirements and promptly fulfilling tax-related responsibilities allows businesses to navigate the excise tax landscape and minimize the risks associated with non-compliance.
Deregistration from Excise Tax
Deregistration from excise tax is possible in the UAE. When a business is certain it no longer needs to pay excise tax, it can apply for deregistration with the FTA, ensuring compliance with the requirements outlined in Federal Decree Law No. 7 of 2017.
Seek the Expert Services of Top Tax Consultants in UAE
In conclusion, the introduction of excise tax in the UAE is a significant move toward fostering a healthier society and increasing government revenue. While consumers may face higher costs, the ultimate aim is to discourage the consumption of harmful products and contribute to the nation's well-being. It is imperative for businesses and individuals to stay informed and compliant with the new tax regulations for successful navigation of these changes. Thus, it advisable for businesses to seek the expert services of top Tax Consultants in UAE to effectively ensure compliance with excise tax regulations. Thus, contact us today and we shall be glad to assist you.
Need help with Excise Tax compliance in UAE? ☎️ Call us at +971 55 4828368 or 📧 Email for a FREE consultation consultant@farahatco.com
Frequently Ask Questions (FAQ)
1. What is Excise Tax in the UAE?
Excise Tax is an indirect tax imposed on harmful or luxury goods like tobacco, energy drinks, and carbonated beverages. It aims to reduce consumption while generating government revenue.
2. What products are subject to Excise Tax in the UAE?
The UAE imposes Excise Tax on:
- Tobacco products (100% tax)
- Energy drinks (100% tax)
- Carbonated drinks (50% tax)
- Electronic smoking devices (100% tax, since 2020)
3. What is the current Excise Tax rate in the UAE?
- 100% on tobacco, energy drinks, and e-smoking devices.
- 50% on carbonated drinks.
4. Who needs to register for Excise Tax in the UAE?
Businesses that produce, import, or stockpile excisable goods must register with the Federal Tax Authority (FTA).
5. How do I register for Excise Tax in the UAE?
- Submit an application via the FTA portal.
- Provide business details (TRN, customs info, product list).
- Receive FTA approval (usually within 5-10 working days).
6. Are there any Excise Tax exemptions in the UAE?
Yes, medical & specialty products (like sugar-free drinks for diabetics) may qualify for exemptions.
7. What are the penalties for non-compliance with Excise Tax?
- Late registration: AED 5,000 – 20,000
- Late payment: 2% monthly penalty
- Incorrect filing: Up to 50% of unpaid tax
8. How is Excise Tax different from VAT in the UAE?
| Excise Tax | VAT |
|---|---|
| Only on harmful goods (e.g., tobacco) | On most goods & services (5%) |
| Higher rates (50%-100%) | Standard 5% rate |
9. Can I reclaim Excise Tax in the UAE?
Generally no, unless goods are exported or destroyed under FTA supervision.