The UAE’s first federal tax has arrived. Since 1 October 2017, excise tax has applied to a specific group of goods under Federal Decree-Law No. 7 of 2017. It comes ahead of VAT, which follows in January, and gives businesses their first experience of registering with and reporting to the Federal Tax Authority.
What is taxed, and at what rate
Excise tax targets goods considered harmful to health. The rates are:
| Goods | Rate |
|---|---|
| Tobacco and tobacco products | 100% |
| Energy drinks | 100% |
| Carbonated drinks | 50% |
The tax is calculated on the higher of the retail sale price and a standard price published by the FTA, so businesses cannot reduce the tax simply by lowering their declared prices.
Who must register
Unlike VAT, there is no turnover threshold. You must register with the FTA if you:
- import excise goods into the UAE;
- produce excise goods in the UAE; or
- stockpile excise goods in certain circumstances.
Businesses that keep excise goods in a designated zone, a specially approved and secured area, must also meet the FTA’s requirements for that zone. Excise tax becomes due when goods are released from the zone for consumption in the UAE.
What registered businesses need to do
- File excise tax returns and pay the tax due within the deadlines set by the FTA.
- Keep detailed records of imports, production, stock movements and sales.
- Register the excise products they deal in, with their prices.
Why it matters for VAT too
Excise tax is added to the price of the goods, and VAT will be charged on top of that from January. Importers and producers of excise goods should model the combined effect on their prices now, and make sure their systems can handle both taxes.
If your business deals in any of these goods, registration is not optional. We can help you assess your position, register and set up the records you need.
This article is general information based on the rules as we understand them at the date of publication. It is not advice on your circumstances. Laws and practice change, so please speak to us before acting on it.
