UAE Excise Tax Laws

UAE Excise Tax Laws: A Comprehensive Overview

The UAE Excise Tax Law is a crucial part of the UAE’s fiscal landscape, aimed at regulating the taxation of specific goods that are considered harmful to health or the environment. The excise tax is an indirect tax levied on goods such as tobacco products, energy drinks, carbonated beverages, and other items that may have adverse effects. This overview will provide an in-depth look at the relevant legal framework, its applicability, exemptions, reliefs, and compliance requirements under the UAE Excise Tax regime.

1. Introduction to UAE Excise Tax Laws

The Excise Tax in the UAE is a form of indirect tax introduced by the Federal Decree-Law No. 7 of 2017 on Excise Tax. The law came into effect on October 1, 2017, and was designed to curb the consumption of harmful goods and generate additional revenue for the government. Excise tax is applied to goods that are deemed harmful to human health or the environment.

The law also complements the broader tax framework in the UAE, working in tandem with Value Added Tax (VAT)and other fiscal measures aimed at diversifying the country’s revenue sources. The excise tax regime is managed by the Federal Tax Authority (FTA), which ensures compliance with the law.

2. Key Laws, Regulations, and Decisions Related to UAE Excise Tax

2.1. Federal Decree-Law No. 7 of 2017 on Excise Tax

This is the principal law governing excise tax in the UAE. It outlines the scope, rates, and enforcement mechanisms for excise taxation, specifying which goods are subject to excise tax, the applicable rates, and how the tax should be administered.

Excise Tax Rates:

- 50% on carbonated drinks.
- 100% on tobacco and tobacco products (including cigarettes, cigars, and shisha).
- 100% on energy drinks.
- 50% on sweetened beverages.
- Additional taxes are applicable to other goods, such as products containing high levels of sugar, and other specified harmful products.

Taxable Goods: The law defines which goods are subject to excise tax, including carbonated beverages, tobacco, energy drinks, and certain other goods that may negatively impact health or the environment.
Taxable Event: The taxable event is generally the production, importation, or stockpiling of goods subject to excise tax within the UAE.

2.2. Cabinet Decision No. 52 of 2017 on Excise Tax Executive Regulations

This decision provides further details on the implementation of the Excise Tax Law, offering guidance on the registration process, tax returns, invoicing requirements, and tax compliance obligations.

Taxable Persons: The decision defines who is required to register for excise tax purposes, including manufacturers, importers, and stockholders of excise goods.
Import and Stock Control: Provides regulations for the reporting, record-keeping, and stock control of excise goods.
Excise Tax Payment: Outlines how and when businesses are required to pay excise tax, including monthly reporting obligations.

2.3. Ministerial Decision No. 374 of 2017 on Excise Tax Registration

This decision sets out the procedures and requirements for registering as an excise taxpayer with the Federal Tax Authority (FTA). Any entity that imports or manufactures goods subject to excise tax must be registered with the FTA.

2.4. UAE Excise Tax Guide and FTA Publications

The Federal Tax Authority (FTA) has published a comprehensive Excise Tax Guide to help businesses understand their obligations under the excise tax law. This guide covers key topics such as:

Excise Taxable Goods: Detailed explanation of which goods are subject to excise tax.
Registration Requirements: Step-by-step instructions on how businesses can register for excise tax.
Reporting and Compliance: Clarifies the requirements for filing excise tax returns and keeping accurate records.

Additional publications from the FTA include:

Excise Tax Rulings: Businesses can request specific rulings from the FTA if they require clarification on how excise tax should be applied to their goods or services.
Excise Tax FAQ: The FTA regularly publishes FAQs to address common questions and issues faced by businesses and individuals regarding excise tax.

3. Applicability of UAE Excise Tax Law

3.1. Goods Subject to Excise Tax

The UAE Excise Tax Law applies to a specific list of goods considered harmful to health or the environment. The key categories include:

Tobacco and Tobacco Products: Cigarettes, cigars, shisha, and other tobacco products are subject to excise tax at a rate of 100%.
Carbonated Beverages: Soft drinks that contain carbonated water and sugar or sweeteners are taxed at a rate of 50%.
Energy Drinks: These drinks, which typically contain stimulants like caffeine, taurine, or other energy-boosting compounds, are taxed at a rate of 100%.
Sweetened Beverages: Beverages that contain added sugar or sweeteners (such as juices, flavored water, etc.) are subject to 50% excise tax.
Electronic Smoking Devices: Devices used for smoking e-liquids or vaporizers are also subject to excise tax, typically at 100%.

3.2. Taxable Persons

The following entities are required to register and comply with the excise tax law:

Manufacturers: Any business producing excise goods within the UAE is liable for excise tax.
Importers: Companies or individuals importing excise goods into the UAE must pay excise tax at the time of importation.
Stockholders: Businesses that hold excise goods in stock, whether for sale or otherwise, are required to pay excise tax.
Distributors and Retailers: Retailers of excise goods must ensure that the correct amount of excise tax has been paid on the goods they sell.

4. Exemptions and Reliefs under UAE Excise Tax Law

While excise tax is levied on a number of products, certain goods and categories may be eligible for exemptions or reliefs, including:

4.1. Exemptions

Non-Taxable Goods: Goods that do not fall under the categories of harmful or unhealthy items are exempt from excise tax. This includes food and beverage products that are not sweetened or carbonated, as well as other non-harmful products.
Medical and Pharmaceutical Products: Certain medical or pharmaceutical products may be exempt from excise tax, provided they meet the necessary regulatory criteria.
Raw Materials for Manufacturing: In some cases, raw materials used for manufacturing excise goods may be exempt from excise tax, depending on the intended use of the product.

4.2. Excise Tax Relief for Specific Industries

Duty-Free Shops: Goods sold in duty-free shops in the UAE (such as at airports) are often exempt from excise tax. However, such goods may still be subject to excise tax when they enter the local market.
Re-exportation: Goods that are imported into the UAE with the intention of being re-exported to another country may be eligible for excise tax relief, provided the proper documentation is submitted to the FTA.

4.3. Special Reliefs for Manufacturers

Tax Relief for Manufacturers: Certain manufacturers may be eligible for specific tax reliefs or credits under the UAE Excise Tax Law if they meet defined criteria related to their production process, such as using environmentally friendly materials or methods.

4.4. Refunds for Exported Goods

Export Refunds: If excise goods are exported from the UAE, the business may be eligible for a refund on excise tax paid on those goods, provided the goods are not consumed within the UAE.

5. Compliance Requirements under UAE Excise Tax Law

5.1. Excise Tax Registration

Businesses involved in the production, importation, or stockpiling of excise goods must register with the Federal Tax Authority (FTA). The registration process involves:

Online registration: Companies must apply through the FTA’s online portal and submit the necessary documentation.
Eligibility Criteria: Businesses must provide information about their activities and the types of excise goods they handle.

5.2. Excise Tax Filing and Returns

Registered businesses are required to file monthly or quarterly excise tax returns (depending on the volume of business). These returns must include:

Details of excise goods: The quantity, value, and type of excise goods imported, manufactured, or stockpiled.
Excise tax payable: The amount of excise tax due based on the applicable rates for each product category.

5.3. Excise Tax Invoicing

Businesses must issue excise tax-compliant invoices for the sale of excise goods. These invoices must detail the excise tax levied on the goods and include the following information: