UAE Excise Tax Guide 2024

The UAE imposes excise tax on specific goods, primarily those considered harmful to human health or the environment. As of 2024, the following goods are subject to excise tax: tobacco and tobacco products (100%), carbonated drinks (50%), energy drinks (100%), sweetened drinks (50%), and electronic smoking devices and tools (100%). The tax is calculated on the retail selling price of these goods. It's crucial for businesses to accurately identify excisable products and apply the correct tax rates.

Businesses involved in the production, import, or storage of excisable goods in the UAE are required to register for excise tax. This includes manufacturers, importers, and warehouse keepers. The registration process is managed by the Federal Tax Authority (FTA) and can be completed online. It's important to note that there is no minimum threshold for registration - any business dealing with excisable goods must register, regardless of the volume of their operations.

Excise tax is calculated based on the retail selling price of the goods. For imported goods, this is typically the higher of the goods' retail price in the UAE market or the designated retail price listed by the manufacturer. For locally produced goods, it's the higher of the retail price or the designated retail price. Understanding the correct basis for calculation is crucial for compliance and avoiding penalties.

Registered businesses must file excise tax returns and make payments on a monthly basis. The deadline for filing and payment is the 15th day of the month following the end of the tax period. Late filing or payment can result in penalties. It's essential for businesses to maintain accurate records of all transactions involving excisable goods to ensure correct reporting and timely payments.

Excise tax is due on imported excisable goods at the point of import into the UAE. Exporters of excisable goods may be eligible for a refund of the excise tax paid, provided they can demonstrate that the goods have been exported and the tax has been paid. This process requires careful documentation and adherence to specific procedures set by the FTA.

Certain situations may qualify for exemptions or refunds of excise tax. For example, diplomatic missions and international organizations may be exempt from excise tax under specific conditions. Additionally, businesses may be eligible for refunds in cases of exports or when excisable goods are used as ingredients in the production of other excisable goods. Understanding these provisions can help businesses optimize their tax position.

Compliance with excise tax regulations is crucial to avoid penalties. The FTA conducts regular audits to ensure adherence to excise tax laws. Penalties for non-compliance can be severe, including fines for late registration, failure to file returns, and incorrect tax calculations. In some cases, repeated non-compliance can lead to criminal prosecution. Businesses should implement robust internal controls and regularly review their excise tax processes to ensure compliance.

Proper record keeping is essential for excise tax compliance. Businesses must maintain detailed records of all transactions involving excisable goods, including purchase invoices, sales receipts, import and export documentation, and inventory records. These records must be kept for a minimum of five years and should be readily available for inspection by the FTA. Digital record-keeping systems can help streamline this process and ensure accuracy.

The implementation of excise tax has had a significant impact on the pricing of affected products and, consequently, on consumer behavior. Businesses need to carefully consider how to manage these price increases, balancing the need to pass on the tax to consumers with maintaining competitiveness. Understanding consumer responses to these price changes is crucial for businesses in sectors affected by excise tax.

The UAE has introduced a Digital Tax Stamp scheme for tobacco products and certain other excisable goods. These stamps help in tracking the payment of excise tax and combating the trade of counterfeit and tax-evaded products. Manufacturers and importers of products subject to this scheme must ensure that their products carry the appropriate digital tax stamps before they can be legally sold in the UAE market.