Excise tax in the UAE is an indirect tax that was introduced to regulate the consumption of certain goods that are considered harmful to health, the environment, or the general well-being of the population. The excise tax law is designed to both encourage healthy choices and reduce harmful consumption, while also generating government revenue.
Introduction to Excise Tax in the UAE
Excise tax was introduced in the UAE on October 1, 2017, under Federal Decree-Law No. 7 of 2017 on excise tax. Such a big step was taken by the government of the UAE to reduce the consumption of the alcoholic beverage healthy and harmful intake. The primary aim of this law is to tax the production, import, and stockpiling of certain products that are seen as harmful to health or the environment.
A complete tax-free economy is not considered healthy for the government. The higher global economic institutions like the International Monetary Fund (IMF) has suggested to these tax-free countries, to implement some tax as the system of a charge. This extra source of revenue will ensure that facilities such as affordable and quality education, health and infrastructure etc. are available to the public. By applying excise duty the government of UAE has taken an excellent step to ensuring the health of the citizen is maintained and has also generated a new source of revenue for the economy of the country.
Types of Goods Subject to Excise Tax
Excise tax applies to a specific set of goods, categorized primarily based on their health or environmental impact. The excise tax rates vary depending on the type of product:
- Tobacco products: 100% excise tax
- Energy drinks: 100% excise tax
- Carbonated drinks (soft drinks): 50% excise tax
- Sweetened beverages: 50% excise tax
- E-cigarettes and liquids: 100% excise tax
These products are targeted because they are believed to be detrimental to public health or contribute negatively to the environment.
Excise Tax Rates
The tax rates are:
- 100% for tobacco products, energy drinks, and e-cigarettes.
- 50% for carbonated and sweetened beverages.
The UAE government implemented these high tax rates to reduce the consumption of unhealthy and environmentally harmful products.
Excluded goods under the purview of Excise Tax
There are many good which are exempt from the ambit of Excise Tax in the United Arab Emirates. These goods include:
- Beverages that are ready to drink and consist of at least 75% milk or milk substitute.
- Any baby formula or any baby food.
- Any beverage which is considered as a part of the special dietary requirement as determined under ‘General Requirements for Pre-packaged Foods for Special Dietary Use’.
- Any beverage which is considered as a part of medical use and is mentioned under the heading ‘General Requirement for Handling of Foods for Special Medical Purposes’.
How to register for excise tax?
Excise tax registration can be done on the e-services section on the FTA website. By the following steps,
- Sign up and create an account.
- Verify all your details and then activate your account using the link sent to your registered email id.
- Log in to the FTA portal using your credentials that have been sent to your account and navigate to the excise tax registration form.
- Fill the form and check that all of the details that should be correct. Finally, click submit to send the form to the FTA.
- After registering your profile, the FTA will notify you of your new Tax Registration Number.
Documents Required for Excise Tax Registration in UAE
The documents required for excise tax registration are:
- Trade license
- Information related to business activity
- Bank account details
- Emirates ID
- Declaration
- Articles of Association
- Certificate of Incorporation
- The custom number issued by the custom department
- Passport of manager, owner, and senior management
- Authorized signatory documents
- Partnership agreement
Conclusion
The excise tax law in the UAE serves a dual purpose: to promote public health and environmental sustainability, while also contributing to the country’s revenue. By targeting goods that are deemed harmful, such as tobacco, sugary beverages, and energy drinks, the UAE aims to reduce their consumption and mitigate associated health risks. The tax also encourages healthier alternatives and fosters a more responsible approach to consumption.