UAE is a hub to many businesses in a variety of sectors. The location proximity of the UAE, stable governance and the business-friendly ecosystem have led many companies and entrepreneurs to start and run their businesses over years successfully. The opportunities created by the firms has led diaspora around the world to move their jobs to UAE and make it their new home.
Like any other countries globally, businesses in the UAE pay many taxes collected at the point of sales like the Value Added Tax (VAT), Excise tax and other local taxes. The purpose behind the different taxes varies from each other. While most of the taxes act as a source of revenue to carry out day to day operations, taxes like excise tax are levied indirectly on the residents, focusing on better health of the residents by restricting unhealthy consumption. In recent times, the Government has also launched many fitness initiatives towards creating awareness on health and improving the diets of the residents.
What is Excise Tax and Purpose Behind Levying tax?
excise tax is an indirect tax imposed on specific goods deemed harmful for human health and the environment. The excise tax came into effect by the Federal Decree-law No.7 of 2017 on excise Tax and came into effect from 17th October 2017.
This tax's sole purpose is to reduce the consumption of harmful goods, thereby restricting unhealthy habits. The businesses directly pay the tax to the Government, collected from the end consumer. The amount collected towards the Excise tax is further spent on beneficial public services.
Eligible Products and Excise rate
- 50% excise duty on the Sugar-Sweetened Beverages (SSB’s) including Carbonated drinks, drinks with added sugar or sweeteners.
- 100 percent duty on energy drinks
- One hundred per cent duty on tobacco products, electronic smoking devices and liquids used in such devices.
Impact of Excise Tax on Related Businesses
Individual or businesses must register for the excise duty if they are part of the following activities:
- Importing excise goods into the UAE
- Manufacturing excise goods in the UAE
- Releasing / Transferring excise goods out of any particular designated zone.
- Stockpiling excise goods in the warehouses in the UAE.
- Selling excise goods in the UAE.
All businesses involved in the activities mentioned above are compulsorily needed to register for the FTA excise tax. Companies will be provided with a Tax Registration Number (TRN) and are required to pay the excise tax and file the returns as per the Government's tax period.
Impact of Excise Tax on Consumers
The manufacturer or importer pays excise tax to the FTA for the excise goods that are further passed down the supply chain and the added taxes that are already paid to the Government. The wholesalers get the duty paid goods from the manufacturer or imported and pass it on to the retailer. The retailer will further sell the duty paid goods to the consumer, which will be higher due to the excise tax levied.
Jaxa Chartered Accountants, as one of the leading tax consultants in the UAE with offices all over, can help businesses understand the excise tax and assist them with all tax-related matters. Our experts can help businesses and entrepreneurs register, de-register, file, and pay the due taxes on time as per the tax period. Please Contact Us in case of queries regarding the excise tax in the UAE. We are looking forward to assist you!