Understanding Excise Tax in the UAE Purpose, Implementation.
Excise tax is an indirect tax levied by the UAE government on specific goods that are deemed harmful to human health or the environment. The primary objectives of excise tax are to: Reduce the consumption of unhealthy and harmful commodities Generate revenue for the government to fund public services and welfare initiatives Excise tax was first introduced in the UAE on October 1, 2017, and has since been expanded to include additional goods.
Goods Subject to Excise Tax The following goods are currently subject to excise tax in the UAE: Tobacco and tobacco products (100% tax rate) Carbonated drinks (50% tax rate) Energy drinks (100% tax rate) Electronic smoking devices and tools (100% tax rate) Liquids used in electronic smoking devices and tools (100% tax rate) Sweetened drinks (50% tax rate) Excise Tax Registration and Compliance Businesses engaged in the import, production, stockpiling, or release of excise goods from designated zones are required to register for excise tax.
This includes importers, producers, stockpilers, and warehouse keepers of the aforementioned goods. Failure to register within the specified time frame can result in penalties and other compliance issues. Businesses must classify their goods, identify tax trigger points, calculate any additional excise tax during the transitional period, and ensure their ERP systems and processes are ready for excise tax compliance. Excise Tax Amendments The UAE government has recently introduced amendments to the Excise Tax Executive Regulations, effective December 1, 2023. These amendments aim to simplify tax procedures, enhance compliance, and promote public health by discouraging the consumption of harmful products.
Key changes include: Introduction of new terminologies and definitions Refund opportunities for non-taxable persons exporting excise goods Compliance requirements for excise tax designated zones Excise tax deduction on exported goods subject to evidentiary requirements Exemptions on excise tax payment for goods with natural shortages By understanding the purpose, implementation, and recent amendments to excise tax in the UAE, businesses can ensure compliance, optimize their operations, and contribute to the country's efforts to promote public health and welfare.
