Updates – Excise Tax in UAE

Introduction

Federal Decree Law No. (7) of 2017 (Excise Law) has applied excise tax to all goods listed in Cabinet Decision No. (38) of 2017 (Decision 38), with effect from 1 October 2017. Decision 38 currently imposes excise tax on “Excise Goods” at the following rates:

• Tobacco and tobacco products – 100%
• Carbonated drinks– 50%
• Energy drinks– 100%

Recently, The United Arab Emirates (UAE) Federal Tax Authority (FTA) has published the Cabinet Decision No.52 of 2019 on Excise Goods, Excise Tax Rates and the Methods of Calculating the Excise price (Cabinet Decision). Same will be applicable from 1^st December 2019.

The Cabinet Decision announced that Excise Tax will be levied on sweetened drinks, liquids used in electronic smoking devices and tools as well as electronic smoking devices and tools.

New Products that will be levied with Excise Tax

1. Liquids used in electronic smoking devices and tools, whether or not containing nicotine or tobacco.

Excise Tax Rate – 100%

1. sweetened drinks: 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. Excise Tax Rate – 50%

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

What Businesses Need 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.

Accordingly, importers, producers, stockpilers warehouse keepers, etc. of electronic smoking devices, liquids used in devices and sweetened drinks need to register for excise tax as soon as possible. Failure in registering within the specified time period can lead to fines and various other obstacles.

When a business would qualify as Stockpiler

A business would consider as Stockpiler in the UAE if the following conditions are met:

• The business held excise goods in free circulation in the UAE, intended to be sold in the course of business and Excise Tax on those goods has not been paid, remitted, relieved or deferred; and
• The business held ‘excess’ excise goods.

Where a business meet the above conditions, they become liable to pay Excise Tax on “excess” excise goods held as on 1^st December, 2019.

TRC Pamco is offering specialized VAT advisory services to many of its clients for Excise Tax implementation and post implementation support.

Please connect us in case you have any queries.