On 17 August 2017, the UAE published Federal Decree Law No. 7 of 2017 on Excise Tax (“Excise Tax Law”) which comes into effect on 1 October 2017 and sets out the framework within which excise tax will be levied in the UAE.
- Applicability: The Excise Tax Law will apply to goods (“Excise Goods”) which are specified by an executive decision. Currently, the website of the Federal Tax Authority (FTA) states that excise tax will apply to tobacco products, carbonated drinks (excluding sparkling water), and energy drinks.
- Tax Rate and Implementation: The Excise Tax Law imposes a cap of 200% on the tax rate for Excise Goods. At present, Excise Tax will be introduced across the UAE in the fourth quarter of 2017 at the following rates:
- 50% for carbonated drinks
- 100% for tobacco products
- 100% for energy drinks
- Taxable Persons: Excise tax will be imposed on the following persons:
- Importers of Excise Goods into the UAE
- Producers of Excise Goods where they are released for consumption in the UAE
- Stockpilers of excise goods in the UAE in certain cases (the Excise Tax Law and the FTA’s website explains a stockpiler to be a person or business that holds a stock of Excise Goods for business purposes and cannot prove that excise tax has previously been paid on those goods)
- Warehouse keepers upon the release of excise goods from a designated zone (the Excise Tax Law and the FTA’s website explains a designated zone as a specified area that is considered outside the UAE for excise tax purposes – in many jurisdictions, they are referred to as excise warehouses. Persons operating a designated zone will have to register themselves with the FTA as a warehouse keeper. If excise goods are imported and immediately placed within a designated zone without being in free circulation, they will not be treated as imported into the UAE for the purposes of excise tax. Tax is not due on the excise goods until the point they leave the designated zone and enter free circulation in the UAE).
- Tax Registration and Returns: Taxable persons are required to register online with the Federal Tax Authority which is expected to commence mid-September. Excise tax returns are required to be filed monthly and tax payments will have to be made on the same day as filing returns.
- Stay up-to-date: The FTA has launched a new website, tax.gov.ae, which sets out the key updates in relation to the upcoming introduction of excise tax and VAT in the UAE.
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Co-authored by Priyasha Corrie and Irina Heaver