What is Excise Tax in UAE? Key features, Registration & Compliance?

Excise Tax in the United Arab Emirates is an indirect tax levied on particular products deemed detrimental to human health or the environment. Its primary purpose is to curtail the consumption of such items. The Federal Tax Authority (FTA) is responsible for the regulation and collection of excise tax within the UAE. Key Features of Excise Tax in UAE 1.Purpose: oDiscourage the consumption of harmful products (like tobacco and sugary drinks). oPromote healthier lifestyles and environmental protection. oGenerate additional revenue for the government to support public services and infrastructure. 2.Applicable Goods (Excise Goods): The UAE levies excise tax on the following categories of products: oTobacco products (all types, including e-cigarettes and vaping devices) – 100% tax oCarbonated drinks (except unflavoured sparkling water) – 50% tax oEnergy drinks (drinks that contain caffeine, taurine, or similar ingredients) – 100% tax oElectronic smoking devices and tools – 100% tax oLiquids used in e-cigarettes – 100% tax oSweetened drinks (any drinks with added sugar or sweeteners) – 50% tax 3.Tax Rate: o50% on sweetened and carbonated drinks. o100% on tobacco products, energy drinks, electronic smoking devices, and liquids used in e-cigarettes. 4.Who Pays the Excise Tax? oExcise tax is paid by importers, producers, and stockpilers of excise goods. oUltimately, the cost is passed on to the consumers, as it increases the retail price of these goods. 5.Registration and Compliance: oCompanies that import, produce, or stockpile excise goods must register with the Federal Tax Authority (FTA) and comply with tax reporting and payment obligations. oBusinesses must submit periodic excise tax returns and pay the due taxes within the specified deadlines. 6.Calculation of Excise Tax: oThe excise tax is calculated on the retail selling price or the declared price (whichever is higher) before the application of VAT. oThe amount of excise tax is included in the final price paid by the consumer. Example of Excise Tax Calculation If an energy drink costs AED 10 before excise tax, the calculation would be: Excise tax (100%): AED 10 x 100% = AED 10 New price after excise tax: AED 10 + AED 10 = AED 20 If Value Added Tax (VAT) is also applicable (5%), it is calculated after the excise tax is added: VAT (5% on AED 20): AED 20 x 5% = AED 1 Final price to the consumer: AED 21