What to Expect From the Recent UAE Excise Tax Law?

While the entire country is pondering over the new VAT regulations which are coming into effect from January 2017 in the UAE, the Government (Ministry of Finance) has announced the implementation of the Excise Tax Law which shall be implemented with effect from October 1, 2017, in the UAE.

According to the finance ministry of the country, the tax shall be exercised on every excise good that is consumed inside the UAE (including the free zones and the ports of the country). Products (goods or services) that are being taken away out of the country by the departing travellers will not be affected by the tax, while the commodities carried into the country by the inbound travellers shall be subjected to the new law.

The official statements have been made following the introduction of the Federal Decree-Law No. 7 of 2017, where it says that the tax shall be implemented on the “excise goods (and services).” These selected goods, along with the method of calculating the excise price, are subject to a decision by the UAE cabinet, depending on the recommendation of the Ministry of Finance. It is also kept in check that the tax rates do not go beyond 200 percent of the excise price.

Here’s everything you need to know about the UAE Excise Tax law (2017):

• The tax is applicable to the import, stockpiling, manufacture or release of excisable goods from a “Designated Zone”

• No significant announcement has been made by the authorities on the list of goods subject to Excise Tax. However, it can be inferred from the information published on the website of Federal Tax Authority (FTA) that the tax will be applied to the carbonated drinks (at a rate of 50%), energy drinks (at a rate of 100%) and tobacco products (at a rate of 100%). The rates that have been mentioned on the website shall be applied to the Retail Selling Price (“RSP”) or the particular product, or “Excise Price” as quoted in the law

• In the law, the “Designated Zones” are described as zones with no fences, or as an area under the management of a warehouse keeper. Interestingly, the Excise Tax will be charged on the excise goods only when they are released from these designated zones and are brought into the local market, which means the tax will be suspended when the excise goods are kept inside the designated zones (during manufacturing or for stockpiling), and also while the goods are moved from one designated zone to another. The details on the operation of the designated zones are yet to be explained by the Executive Regulations.

• The entities who are involved in the manufacture, stockpiling or import of the excisable goods for business purposes, need to register themselves for Excise Tax. However, some exceptions to this provision can be there.

• People who fall under the provisions of Excise Taxes must submit periodical returns in sync with the tax period and deadlines that are yet to be specified by the Executive Regulations.

• The excise products that are exported from the UAE will not fall under the Excise Tax regulations. Speculations are that the Executive Regulations are yet to regulate some other exemptions as well.

• Every Excise Taxpayer needs to maintain the following record keeping obligations:

1. Records of each excise product; imported, manufactured or stockpiled.
2. Record of exported excise products along with the evidence of the particular export.
3. Records related to stock levels which should include the details of lost of destroyed items.
4. Records on the tax dues on the excise products, including (imported excise products, produced excise products, and stockpiled excise goods), and the deductible tax.

• The tax marking on a few particular excisable products will be announced in the later stage.

• Few penalties have been imposed as per the UAE Federal Law No.7 of 2017 on Tax procedures. Apart from that, there will be additional administrative penalties and tax evasion cases for Excise Tax purposes according to the UAE Excise Tax Law.

It is believed that the implementation of the Excise Tax will benefit the society as it discourages the consumption of the products that have a negative impact on the environment and the health of the people living in it. The revenue that supposed to be generated from the tax will be utilised by the government to support advanced support for every member of the society. It is believed that the tax may generate up to DH7 billion in annual revenues for the federal budget.

Concerned about the latest Tax Regulation in the country? Get consulted from the professional tax consultants at Uaevatexpert.ae

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