Introduction to Excise Duty in UAE

Posted on Oct 16, 2017

Introduction to Excise Duty in UAE

The​ ​law​ ​shall​ ​enter​ ​into​ ​force​ ​on​ ​1​ ​October​ ​2017.​ ​The​ ​recently​ ​launched​ ​Federal​ ​Tax​ ​Authority​ ​website​ ​maintains​ ​a​ ​statement​ ​whereby​ ​Excise​ ​Tax​ ​will​ ​be introduced​ ​in​ ​the​ ​fourth​ ​quarter​ ​of​ ​2017.

What is Excise Duty?

Excise, according to the Federal Court and Privy Council is a tax attracted by the event of manufacture but collected at some convenient stage which may be after the said event, which is only for administrative convenience.

It is a duty levied upon goods manufactured and not upon sales or the proceeds of sale of goods. Therefore the duty of excise is levied on a manufacturer or producer in respect of the commodities produced or manufactured by him. It is a tax upon manufacture of goods and not upon sales or proceeds of sale of goods. The UAE Government is levying excise tax to reduce consumption of unhealthy and harmful commodities while also raising revenues for the government that can be spent on beneficial public services.

Application of Excise Duty on Specific Goods -

Excise tax is a form of indirect tax levied on specific goods. These goods are typically those that are harmful to human health or the environment. These goods are referred to as “excise goods”. When considering whether a product is an excise good, the following definitions apply:-

  • Carbonated drinks include any aerated beverage except for unflavoured aerated water. Also considered to be carbonated drinks are any concentrations, powder, gel, or extracts intended to be made into an aerated beverage.
  • Energy drinks include any beverages which are marketed, or sold as an energy drink, and containing stimulant substances that provide mental and physical stimulation, which includes without limitation: caffeine, taurine, ginseng and guarana. This also includes any substance that has an identical or similar effect as the aforementioned substances. Also considered to be energy drinks are any concentrations, powder, gel or extracts intended to be made into an energy enhancing drink.
  • Tobacco and tobacco products include all items listed within Schedule 24 of the GCC Common Customs Tariff.

Rate of Excise Tax -        

The rates of excise tax in the UAE will be:

  • 50 per cent for carbonated drinks
  • 100 per cent for tobacco products
  • 100 per cent for energy drinks.

The​ ​FTA​ ​website​ ​includes definitions​ ​for​ ​carbonated​ ​drinks,​ ​energy​ ​drinks​ ​and​ ​tobacco​ ​products. It has been prescribed that the rate will not exceed 200%.

Exemption from Excise duty -

Products​ ​that​ ​are​ ​exported​ ​from​ ​the​ ​UAE​ ​shall​ ​be​ ​exempt​ ​from​ ​Excise​ ​Tax;​ ​other​ ​exemptions might​ ​be​ ​regulated​ ​in​ ​the​ ​Executive​ ​Regulations.​ ​Likewise​ ​the​ ​UAE​ ​Excise​ ​Tax​ ​Law​ ​provides for​ ​a​ ​number​ ​of​ ​refund​ ​cases. Designated​ ​Zones​ ​are​ ​defined​ ​as​ ​fenced​ ​free​ ​zones​ ​or​ ​any​ ​other​ ​area.​Excise​ ​Tax​ ​shall​ ​be​ ​levied​ ​only​ ​where​ ​the​ ​excisable​ ​goods​ ​are​ ​released from​ ​these​ ​areas​ ​into​ ​the​ ​local​ ​market,​ ​i.e.​ ​Excise​ ​Tax​ ​is​ ​suspended​ ​while​ ​the​ ​goods​ ​are​ ​kept inside​ ​these​ ​areas,​ ​whether​ ​for​ ​manufacturing​ ​or​ ​storing​ ​purposes,​ ​and​ ​where​ ​goods​ ​are moved​ ​between​ ​two​ ​Designated​ ​Zones.

Tax Registration and Deregistration -

Tax Registration

Registration​ ​for​ ​Excise​ ​Tax​ ​is​ ​generally​ ​required​ ​for​ ​entities​ ​that​ ​are​ ​involved​ ​in​ ​the manufacture,​ ​import​ ​or​ ​stockpiling​ ​of​ ​excisable​ ​goods​ ​for​ ​business​ ​purposes.​ The​ ​taxpayers​ ​will​ ​be​ ​able​ ​to​ ​deduct​ ​the​ ​Excise​ ​Tax​ ​paid​ ​for​ ​goods​ ​that are​ ​exported,​ ​goods​ ​that​ ​are​ ​used​ ​to​ ​manufacture​ ​other​ ​excise​ ​goods​ ​that​ ​will​ ​be​ ​subject​ ​to​ ​tax, and​ ​the​ ​Excise​ ​Tax​ ​paid​ ​by​ ​mistake​ ​from​ ​the​ ​Excise​ ​Tax​ ​due​ ​in​ ​each​ ​of​ ​the​ ​tax​ ​periods.

1. A Person shall be prohibited from conducting any activities that fall within clause (2) of Article (2) of this Decree-Law before registration thereof for Tax purposes in accordance with the provisions of this Article.

2. Without prejudice to the provisions of clause (1) of this Article, the Person liable for the Due Tax according to Article (4) of this Decree-Law shall apply to the Authority for Tax Registration as set forth in Federal Law No. (7) of 2017 on Tax Procedures, within 30 days as of the end of any month during which the Person carries out or intends to carry out activities mentioned in Article (2) of this Decree-Law, or from the effective date of this Decree-Law, whichever is later.

3. The Executive Regulation of this Decree-Law shall determine the effective date of the Tax Registration referred to in this Article.

Registering for excise tax is the responsibility of any business engaged in:

  • the import of excise goods into the UAE
  • the production of excise goods where they are released for consumption in the UAE
  • the stockpiling of excise goods in the UAE in certain cases
  • anyone who is responsible for overseeing an excise warehouse or designated zone i.e. a warehouse keeper

Registration as a Warehouse Keeper

1. Any Person operating or intending to operate a Designated Zone shall apply for registration as a Warehouse Keeper pursuant to what is specified in the Executive Regulation of this Decree-Law.

2. The Executive Regulation of this Decree-Law shall specify the effective date of registration referred to in this Article.

 3. A Person shall not act as a Warehouse Keeper before his registration in accordance with this Article.

Excise Records To be maintained

Excise​ ​Tax​ ​taxpayers​ ​must​ ​comply​ ​with​ ​specific​ ​record​ ​keeping​ ​obligations,​ ​including -

(a) Records of all produced, imported or stockpiled excise goods;
(b) Records of exported excise goods and evidence of such export;
(c) Records of stock levels, including details of lost or destroyed items; and
(d) Records that includes the following information: 
  • tax due on imported excise goods; 
  • tax due on produced excise goods; 
  • tax due on excise goods that have been stockpiled; and 
  • deductible tax.
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