UAE Excise Tax
The
United Arab Emirates (UAE) introduced excise tax in October 2017 to curb the
consumption of products detrimental to public health and the environment. This
indirect tax targets specific goods, referred to as "excise goods,"
which are subject to higher tax rates to discourage their use.
Goods Subject to Excise Tax and tax applies under the categories
Goods
Subject to Excise Tax
Excise Tax is primarily
a form of "sin tax" imposed on goods that are deemed harmful to
public health or the environment. The main objective is not only to generate
revenue but also to discourage the consumption of specific goods.
·
What
It Covers: Excise Tax applies to goods such as tobacco
products, energy drinks, and carbonated drinks. In 2019, sweetened beverages
and electronic smoking devices were also added to the list.
The
excise tax applies to the following categories:
Ø Tobacco and Tobacco Products:
Includes items listed under Schedule 24 of the GCC Common Customs Tariff, such
as cigarettes, cigars, and various forms of smokeless tobacco.
Ø Carbonated Drinks:
Encompasses all aerated beverages, excluding unflavored sparkling water. This
also covers concentrates, powders, gels, or extracts intended for making such
drinks.
Ø Energy Drinks:
Beverages marketed as energy-boosting and containing stimulants like caffeine,
taurine, ginseng, and guarana. This category also includes related concentrates
and powders.
Ø Electronic Smoking Devices and
Liquids: All electronic smoking devices, tools, and the
liquids used within them, whether they contain nicotine or not.
Ø Sweetened Drinks:
Any beverage with added sugar or sweeteners, including ready-to-drink beverages
and concentrates. Exemptions include beverages with at least 75% milk, baby
formula, and certain medical or dietary products.
Applicable Tax Rates , Registration and Compliance, Impact and Developments
Applicable
Tax Rates
The excise tax rates are as follows:
·
100%:
Tobacco products, energy drinks, electronic smoking devices, and liquids used
in such devices.
·
50%:
Carbonated drinks and sweetened beverages.
Registration
and Compliance :
Businesses
involved in importing, producing, or stockpiling excise goods, as well as those
overseeing excise warehouses or designated zones, are required to register with
the Federal Tax Authority (FTA). Registered entities must file excise tax
returns by the 15th day of the month following the end of each tax period,
detailing the amount due. Compliance with these regulations is essential to
avoid penalties.
Impact
and Developments :
Since its implementation in October 2017, the UAE's
excise tax has significantly increased the number of registered businesses and
products. By the end of September 2022, registrants grew by 375% to 1,469, and
registered excise goods reached 30,834, marking a 901.75% increase since 2017.
As of May 2024, the UAE has collected over $47
billion in VAT and excise tax since their implementation. VAT revenues at the
state level reached $43.4 billion, while the federal government collected $13
billion. Excise tax collections at the state level totaled $3.8 billion, with
the federal government collecting $1.4 billion.revenue.
For businesses and consumers in the UAE,
understanding the scope and implications of the excise tax is crucial for
compliance and informed decision-making.
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