The UAE Government wants to protect their citizens from harmful goods. Since 1 December 2019, the UAE has imposed an excise duty of 100 percent on electronic smoking devices and liquids used in such devices and an excise tax of 50 percent on sweetened drinks. Other harmful products have been subject to excise duties since 2017.

The UAE does not levy personal income tax. However, it introduced VAT on 1 January 2018 and excise tax on 1 October 2017.

What is excise tax?

Excise tax was introduced across the UAE on 1 October 2017. Excise tax is a form of indirect tax levied on specific goods which are typically harmful to human health or the environment. The aim of excise tax is to reduce consumption of these commodities, whilst also raising revenues for the government that can be spent on public services (see also “Rates of Excise Tax in the UAE”). These goods are referred to as “excise goods”. When considering whether a product is an excise good, the following definitions apply:

1. Carbonated drinks include any aerated beverage except for unflavored aerated water. Also considered to be carbonated drinks are any concentrations, powders, gels, or extracts intended to be made into an aerated beverage.
2. Energy drinks include any beverages which are marketed or sold as an energy drink and contain stimulant substances that provide mental and physical stimulation. This includes, among others: caffeine, taurine, ginseng.
3. Tobacco and tobacco products and devices.
4. From 1 December 2019: Electronic smoking devices and tools, liquids used in such devices and sweetened drinks.

Businesses required to register for excise tax

Registering for excise tax is the responsibility of any business engaged in (see also “Registration, Cost and Effect of Excise Tax in the UAE”)

• the import of excise goods into the UAE
• the production of excise goods where they are released for consumption in the UAE
• the stockpiling of excise goods in the UAE in certain cases
• anyone who is responsible for overseeing an excise warehouse or designated storage space

There is no registration threshold for excise tax. Therefore, any corporation which intends to be involved in any of the activities listed above must register and account for excise tax, explain the experts from Ecovis.

Rates of Excise Tax in the UAE

The rate of excise tax in UAE is as follows:

• 50 per cent on carbonated drinks
• 100 per cent on tobacco products
• 100 per cent on energy drinks
• 100 per cent on electronic smoking devices
• 100 per cent on liquids used in such devices and tools
• 50 per cent on any product with added sugar or other sweeteners

Registration, Cost and Effect of Excise Tax in the UAE Registration, Cost and Effect of Excise Tax in the UAE Source: Federal Tax Authority United Arab Emirates

Author: ECOVIS Fuller International CPA, a member of ECOVIS International, Dubai, United Arab Emirates