Excise Tax Consulting
Excise tax is a form of indirect tax levied on specific goods called “excise goods” which are typically harmful to human health or the environment. The Excise tax was introduced across the UAE in 2017.
The purpose of levying excise tax is to reduce the consumption of unhealthy and harmful commodities as well as to raise revenues for the government that can be spent on beneficial public services. Ultimately, consumers need to pay more for goods that are harmful to human health or the environment.
It is advisable that a Taxable person engaged in activities relating to excise goods such as tobacco products, carbonated drinks, and energy drinks should empower an audit firm to get professional advice on Excise Tax issues.
Who should Register for Excise Tax?
The companies that are engaged in the following areas are to Register for Excise Tax: -
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
A warehouse keeper who is responsible for overseeing an excise warehouse or designated zone.
Rights of a person during aTax Auditrelating to Excise Liability in UAE
During the proceedings of Tax Audit, a taxable person has the following rights -
To monitor the procedure while the documents are being removed by the auditor
To get back the documents if removed by the auditor once the tax assessment is completed.
To demand and obtain a receipt from the auditor against the removal of any record or document.
Products to be Registered as Excise Goods
Carbonated drinks including any aerated beverage except for unflavored aerated water
Energy drinks, which comprise any beverages which are marketed, or sold as an energy drink, and containing stimulant substances that give mental and physical stimulation.
Tobacco and nicotine products
Electronic smoking devices and tools
Fluids used in electronic smoking devices and tools
Products Exempted fromExcise Tax-
Ready-to-drink beverages containing at least 75 percent milk or milk substitutes
Baby formula/Baby food
Beverages consumed for special dietary needs
Beverages consumed for medical uses.
Rate of excise tax-
As per the Cabinet Decision No. 52 of 2019 on Excise Goods, the rate of the excise tax is given as below:
50 per cent on carbonated drinks
100 percent on tobacco products
100 percent on energy drinks
100 percent on electronic smoking devices
100 percent on liquids used in such devices and tools
50 per cent on any product with added sugar or other sweeteners.
New excise list and tax rates -
50 per cent on Sweetened drinks
100 percent on Electronic smoking devices and tools
100 percent on Liquids used in electronic smoking devices
Minimum Price for Tax Registration -
A minimum price of Dh0.40 must be applied per individual cigarette; and a minimum price of Dh0.10 must be applied on waterpipe tobacco, ready-to-use tobacco or similar product.
Records to be maintained as perExcise Tax Law in Dubai, UAE
A tax registered person is required to maintain the following documents as per the Excise Law in the UAE for a one-year period prior to Excise Tax implementation
Accounts and supporting documents of all imported, produced or stockpiled Excise products/ goods.
Proof of excise products sold outside the UAE.
Supporting documents of excise goods exported outside the UAE.
Detailed account of physical inventory held by the taxable person.
Account of excise goods if lost or destroyed.
Tax record regarding tax due on excise goods imported/manufactured by the taxable person in the UAE.
Tax record regarding tax due on excise goods that are purchased or produced for the purpose of stockpiling.
Proof of tax deducted on tax paid and submitted on excise goods sold outside the UAE
Statement of item-wise details of excise goods physically kept by the taxable person in the context of value and quantity.
Statement of information concerning average monthly inventory held by the taxable person.
Statement of information concerning average monthly sale for each excise item.
Statement of details concerning excise products manufactured by the taxable person.
Statement of details concerning excise products purchased from outside the UAE (Import) by the taxable person.
Item wise details of Excise goods produced by the taxable person.
Item wise details of Excise goods imported by the taxable person.
Item wise details of Excise goods sold locally by the taxable person.
Item wise details of Excise goods sold outside the UAE (Export) by the taxable person.
Item wise details of Excise goods released from the specified designated zone.
Details of the companies and retailers the excise products are sold by the taxable person.
Tax Compliance and Penalties
FTA has the authority to conduct audits of taxable businesses and then impose penalties on those that do not comply with the law.
FTA’s database is linked directly to the customs department and the taxable items under excise list have item codes that can be easily identified.
Following the implementation of excise duties on the newly added items, importers will not be able to clear any of the taxable items through customs if they are not registered with the FTA.
The failure to register for excise duties within the deadline invites a penalty of Dh20,000
The failure to register excess existing stocks of taxable items as of December 1, 2019, ahead of January 15, 2020, could invite a penalty of Dh20,000.