In 2017, the UAE introduced excise taxation, a distinctive form of indirect tax aimed at specific goods known as ‘excise goods.’ These are typically products that pose harm to human health or the environment. For a product to fall under the category of ‘excise goods,’ certain definitions are applied.

Tobacco, Electronic Smoking Devices and Tools:

Including the devices themselves and the liquids used in these devices.

Carbonated Drinks:

Products with added sugar or other sweeteners are now included in the excise tax framework.

Excise Tax Rates:

To ensure compliance and provide transparency, the UAE Government has defined specific excise tax rates as follows:

• Carbonated Drinks: 50% excise tax
• Tobacco Products: 100% excise tax
• Energy Drinks: 100% excise tax
• Electronic Smoking Devices: 100% excise tax
• Liquids for Smoking Devices: 100% excise tax
• Sweetened Products: 50% excise tax

The Purpose:

The driving force behind excise tax is twofold. First, it aims to curtail the consumption of goods that are detrimental to health and the environment. Second, it generates additional government revenue to enhance public services.

Impact on Consumers:

With the expansion of excise tax to cover a wider range of products, consumers can expect to pay more for items recognized as harmful to human health or the environment.

Business Compliance:

It is essential for businesses involved in the import, production, or storage of excise goods to register for excise tax as mandated by the UAE Federal Decree Law No. 7 of 2017. This registration is also required for those overseeing excise warehouses or designated zones. While the Federal Tax Authority (FTA) is dedicated to providing support and guidance, the responsibility for compliance ultimately rests with the businesses. Non-compliance may result in audits and penal measures by the FTA.

Registration Process:

Businesses can conveniently register for excise tax through the FTA’s e-services section on their website. However, prior registration, businesses must create an account on the portal. For comprehensive details on registration, please refer to the Excise Tax Registration User Guide available on the FTA’s website.

Deadline for Registration:

Notably, there is no specified threshold for excise tax registration. Any corporation intending to engage in activities related to excise goods must complete the registration before the introduction date, which was 1 October 2017. This is in line with the government’s proactive approach to tax regulation.