Excise tax in the UAE

What is an excise tax?

An excise tax is an indirect tax that is levied on excise goods which are usually harmful to the environment and human health. The excise tax is collected earlier in the supply chain and affects the price of the excise goods for the final consumers. Importers and manufacturers should register for excise tax, submit their excise returns, pay excise tax due to the Federal Tax Authority, and maintain excise tax records.

What are excise goods?

These goods are listed as excise goods:

  • Carbonated drinks including flavored aerated beverages.
  • Concentrations, powder, gel, or extracts used to make carbonated drinks.
  • Energy drinks containing stimulant substances, such as caffeine, taurine, ginseng, and guarana.
  • Concentrations, powder, gel, or extracts used to make energy drinks.
  • Tobacco and tobacco products.

What are the rates of excise tax?

The rate of excise tax depends on each excise good:

  • Carbonated drinks: 50%
  • Products with added sugar and other sweeteners: 50%
  • Tobacco products: 100%
  • Energy drinks:100%
  • Electronic smoking devices, and the liquids used in such devices: 100%

What are the excise prices?

The excise price should be the higher price of the following two:

  • The price published by the Authority for the relevant excise good in a standard price list.
  • The price designated by the retailer minus the included tax amount.

Here’s how you should deduct the amount of tax included in the retail sales price:

  • For 50% excise-rated goods: The excise price should equal two-thirds of the designated retail sales price.
  • For 100% excise-rated goods: The excise price should equal half of its designated retail sales price.

The excise price of carbonated drinks is calculated according to the mechanism implemented by the Minister of Finance.

Which businesses are required to register for excise tax?

Businesses who are involved in the following are required to register for excise tax:

  • Importing excise goods into the UAE.
  • Producing excise goods for consumption in the UAE.
  • Stockpiling excise goods in the UAE.
  • Overseeing excise goods at warehouses or designated zones.

The Federal Tax Authority is allowed to audit taxable corporates and penalize those who do not abide by the law.

Why is an excise tax imposed?

The excise tax increases the prices of goods that are harmful to human health and the environment, therefore, it is expected to contribute to the reduction of the consumption of unhealthy goods. These taxes also raise revenues for the government to use for beneficial public services.