The UAE has imposed excise tax on many commodities since October 2017. UAE has imposed excise tax on particular items throughout importation, production, and sale. If you are importing or producing products in the UAE. Then, you must know whether you are eligible for excise tax. The government of UAE has imposed this tax to generate revenue. Also, to discourage customers from consuming harmful products Now, let’s see the approaches to excise tax calculation in UAE.
However, the excise tax is successfully generating revenue for the government. There are still many challenges businesses face. So, let’s briefly look over the issues you might face about excise tax in UAE.
Increased prices of goods
One of the major impacts of excise tax has been an increase in the prices of goods subject to the tax. This is noticeable for carbonated drinks and tobacco products. These are more expensive than they were before the introduction of the tax.
Shifting consumer preferences
Some consumers have reacted to the high prices of excise-taxed goods. They have shifted to the cheaper alternatives. For example, some smokers have shifted to cheaper cigarette brands and smoking less.
Compliance challenges for businesses
Businesses that sell goods subject to excise tax must comply with the new regulations. This has involved implementing new accounting and reporting procedures. These new rules and regulations can be challenging for them.
How to do excise tax calculation in UAE?
Before discussing the excise tax calculation in UAE. Let’s discuss what the excise tax in UAE is. Excise tax is a form of indirect tax levied on specific goods that are typically harmful to the environment or humans. These goods are known as “excise goods.” When considering excise goods and products, the following definition applies:
Carbonated drinks
These include any aerated beverage except for unflavored aerated water. Moreover, carbonated drinks are any gel, concentrations, or extracts intended to be made into an aerated beverage.
Energy drinks
These energy drinks include any beverages that are marketed as energy drinks and contain stimulant substances. These substances provide physical or mental stimulation. These include caffeine, guarana, ginseng, and taurine. These also include any substance that has an identical effect as the aforementioned substances. Also, these are any powders, extracts, or other substances intended to be made into energy-enhancing drinks.
Tobacco and tobacco products
These include all items listed within Schedule 24 of the GCC Common Customer Tariff.
Excise tax calculation in UAE involves applying a fixed tax rate per unit of the product. This method for calculating excise tax depends on the product category.
Specific Tax Method
For some products, such as tobacco products and energy drinks, you can calculate the excise tax using the specific tax method. This method involves applying a fixed tax rate per unit of the product. For example, the excise tax rate for cigarettes in the UAE is AED 0.4 per cigarette.
Ad Valorem Tax Method
For other products, such as carbonated drinks and certain sugary products, you can calculate the excise tax using the ad valorem tax method. This method involves applying a fixed tax rate to the retail selling price of the product. For example, the excise tax rate for carbonated drinks in the UAE is 50%.
Calculation Example
Let’s calculate the excise tax for a pack of cigarettes in the UAE that costs AED 20. Using the specific tax method, the excise tax would be AED 0.4 per cigarette, so 20 cigarettes * AED 0.4 per cigarette = AED 8 in excise tax. Therefore, the total price of the pack of cigarettes after excise tax is AED 20 + AED 8 = AED 28.
Rate of excise tax in UAE
According to Cabinet No. 52 of 2019 on Excise Goods. The rate of excise is as follows:
- 100 percent on tobacco products
- 50 percent on carbonated drinks
- 100 percent on energy drinks
- 100 percent on liquids used in such devices and tools
- 50 percent on any product with added sugar or other sweeteners
- 100 percent on electronic smoking devices
Businesses required to register for excise tax
Under UAE Federal Decree-Law No. 7 of 2017 on Excise Tax, registering for excise tax is the responsibility of any business.
- The production of excise goods where they are released from consumption in UAE.
- The import of excise goods into the UAE.
- Anyone who engages in overseeing an excise warehouse or designated zone, such as a warehouse keeper.
- The stockpiling of excise goods in UAE.
FTA has the power to conduct audits of taxable corporations and impose penal measures on those who stay incompliant.
How to register for excise tax?
Businesses can register for excise tax through the e-service. You can find this e-service on the FTA website. First, they have to sign up and, afterward, create an account. You can also read this Excise tax registration user guide.
Moreover, there is no registration for excise tax. Therefore, any entity that carries out any of the activities above must register for excise tax.
Conclusion
In this blog, we discussed the excise tax and excise tax calculation in UAE. It is advisable to hire the best accounting and bookkeeping firms in UAE for your accounting work to stay compliant with new regulations.
ebs is a leading provider of excise tax services in UAE. We offer a good range of services to help businesses comply with excise tax regulations. Here are the top excise tax services we provide in UAE:
- Excise tax registration
- Excise tax consultancy
- Refund assistance of excise tax
- Excise tax audits
- Excise tax risk management
If you are looking for a reliable provider of excise tax services in UAE. ebs is your best choice to stay compliant and get the services. Our services include accounting and bookkeeping services, Auditing, Due Diligence audit services, and many more. You can get in touch with our experts and contact us today.
FAQ’s
What is excise tax in the UAE?
Excise tax is a consumption tax levied on specific goods in the UAE. For example, tobacco products, carbonated drinks,’ energy drinks, and electronic smoking devices.
Who is liable for excise tax in the UAE?
Any business that imports, produces, or stocks excise goods in the UAE is liable for excise tax. The tax is payable to the Federal Tax Authority (FTA).
How is excise tax calculated in the UAE?
You can calculate the excise tax using either the specific tax method.
The specific tax method applies to tobacco products and energy drinks. This method involves applying a fixed tax rate per unit of the product. For example, the rate of excise tax is AED 0.4 per cigarette.