FAQs

Federal Decree-Law No. (7) of 2017 on Excise Tax has been issued and states that it comes into effect on 1 October 2017.

Businesses required to register for excise tax will need to apply to the FTA via an online system. Registrations for excise tax will open mid-September 2017.

The following goods will be subject to excise tax in the UAE at the following rates of tax:

  • Carbonated drinks – 50%
  • Energy drinks – 100%
  • Tobacco – 100%

Excise tax will be applied to the retail selling price of the goods, at the rate applicable to the excise good in question e.g. excise tax will apply at a rate of 100% to the retail selling price of tobacco products.

Details on identification of retail selling price will be issued in due course.

The following groups will be required to register for excise tax:

  • Producers of excise goods.
  • Importers of excise goods.
  • Stockpilers of excise goods.
  • Warehouse keepers responsible for excise goods.

Businesses that are required to pay excise tax will need to do the following:

  • Register with the FTA;
  • Submit excise tax returns on a monthly basis; and
  • Pay the excise tax due on the same date as submitting a tax return.

A stockpiler is a person or business that holds a stock of excise goods for business purposes and cannot prove that excise tax has previously been paid on those goods.

If a business is not considered to be a stockpiler, it will not need to account for excise tax on goods owned after the introduction of the tax that were purchased before the introduction of excise tax.

Excise tax is a tax on certain goods that are intended for consumption in the UAE. Tax is due when goods are ‘released for consumption’ i.e. when they enter free circulation in the UAE.

Excise tax is due when:

  • Excise goods are imported into the UAE
  • Excise goods are released for consumption in the UAE (e.g. manufactured and released from a designated zone/excise warehouse etc)
  • Excise goods are acquired by a stockpiler, where tax has not previously been paid on those goods
  • Excise tax is not a transaction-based tax, which means that goods do not need to be sold in order for the tax to be due

For an area to be treated as a designated zone it must be officially registered and approved by the FTA.

In theory, any area may be approved as a designated zone. The approval process will involve specifying the location and boundaries of the designated zone. The FTA may also specify that a certain level of security should be imposed, or that certain conditions should be maintained to protect the integrity of the excise goods stored in the zone.

A warehouse keeper must also register for tax and be appointed as being responsible for the designated zone. A producer, importer or stockpiler is able to register its own warehouse as a designated zone. A producer, importer or stockpiler can also be appointed as warehouse keeper for that designated zone. A warehouse keeper is responsible for maintaining any conditions imposed by the FTA on the operation of the designated zone.

A warehouse keeper is also jointly and severally liable for the tax liability of the excise goods stored in its designated zone. If a producer, importer or stockpiler does not account for excise tax on removal of the goods from a designated zone, then the warehouse keeper will be jointly responsible for payment of the tax due.

Unlike VAT, excise tax is paid once in the supply chain and businesses that have purchased excise goods cannot obtain a refund of the excise tax paid on those goods. There are a limited number of cases where a refund of excise tax will be available. Those cases are:

  • When excise tax has been paid on an excise good, which is then produced in to a ‘new’ excise good, on which excise tax is again due
  • When excise tax has been paid on an excise good that is then exported outside the UAE, or
  • When amounts have been paid to the FTA in error.
  • Excise tax is not a transaction-based tax, which means that goods do not need to be sold in order for the tax to be due

In the above cases, a business registered for excise tax will be entitled to a refund of the excise tax paid. The refund will be granted by allowing a deduction of the refundable amount from the tax due in the next excise tax return period. There are also a limited number of cases where refunds will be available to people who are not registered for excise tax. Those cases are:

  • Where excise tax has been paid by certain international governments, diplomatic missions and international organisations in the course of their official activities, where a reciprocal agreement is in place between the UAE and the entity’s home country, and
  • Where excise tax has been paid in the UAE by a person who is registered for excise tax in another GCC country that is implementing excise tax and who has then exported the excise goods out of the UAE and paid excise tax in that other GCC country

A refund request form will be available on the FTA website that can be used to request refunds.

Travellers entering the UAE with excise goods for non-business purposes will not be required to register as an importer of excise goods.

Travellers may need to pay the excise tax due on the goods depending on the value of the goods being imported. Where the value of the goods is below the threshold for exemption from Customs Duty as per the Customs Laws, no excise tax is due.

Where the value of excise goods exceeds the value of the exemption for Customs Duty purposes, then excise tax will be due on the total value of the goods.

Physical payment of excise tax will be required before or at the time of import. Further details on the channels that will be available for travellers or non-registered persons to pay the excise tax liability will be released in due course.

Generally, retailers are not expected to register for excise tax because they are not expected to be importers or producers of excise goods.

Retailers will only need to register for excise tax if they are:

    • Producers of Excise Goods in the State; where that production is in the course of doing business.
    • Importers of Excise Goods.
    • Warehouse Keepers of a Designated Zone.
    • Stockpilers of Excise Goods in the State, where that Stockpiling is in the course of doing business.

After the law comes in to effect, it is expected that in most cases, retailers will purchase excise goods that are already in free circulation. These goods will already have had excise tax applied and paid.

Excise is not a transaction based tax; it is due at the point the goods are released for consumption in the UAE, regardless of whether they will remain unsold.

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