Implemented in 2017, the Excise tax is an indirect tax imposed on goods that are usually harmful to human health or the environment such as tobacco products, carbonated drinks, energy drinks, and electronic cigarettes. Hence, businesses dealing in these products are required to ensure excise tax compliance to avoid hefty penalties and legal repercussions.
The Federal Decree-Law No. 8 of 2017 on Excise Tax stipulates the rules and regulations of excise tax in the UAE, including the tax rates, taxable supplies, registration requirements, and compliance obligations for companies.
Excise tax compliance: Eligible entities
Entities involved in the production, import, storage, or supply of excise goods are required to register for excise tax in the UAE. These include:-
- Manufacturers of excisable goods
- Importers of excisable goods
- Stockpilers who have a stock of excisable goods
- Warehouse keepers storing excisable goods
Products registered as Excise goods in the UAE
Businesses need to identify products that fall under the taxable category in order to ensure effective Excise Tax compliance. The below-listed goods are typically subject to excise tax in the UAE:
- Tobacco products such as cigarettes, cigars, rolling tobacco, and other tobacco-based products
- Carbonated drinks
- Energy drinks including caffeine, taurine, or guarana
- Sweetened drinks
- Electronic smoking devices and tools
- Liquids used in electronic smoking devices and tools
The tax rate on the above goods varies depending on the product category. For instance, the excise tax rate on tobacco and tobacco products is 100% whereas on carbonated drinks and sweetened drinks, it is 50%.
Excise tax rates on specified goods
According to the Cabinet Decision No. 52 of 2019 on Excise Goods, the defined tax rates for excise goods are as below:
- Carbonated drinks – 50%
- Tobacco products – 100%
- Energy drinks – 100%
- Electronic smoking devices – 100%
- Liquids used in such devices and tools – 100%
- Products with added sugar or other sweeteners – 50%
It is to be noted that the Federal Tax Authority (FTA), the regulatory body responsible for administering tax activities in the UAE, holds the power to expand the list of excise goods and tax rates in the future. Thus, to stay updated on the latest regulations, partner with Shuraa Tax.
Products exempted from Excise Tax in the UAE
As discussed earlier, the primary focus of tax authorities for implementing excise tax is goods harmful to human health. However, certain goods are excluded from this list and thus, exempted from this tax. For example,
- Unflavored sparkling water
- Drugs and medicines
- Foodstuffs
- Infant formula and baby food
- Dietary products for specific medical conditions
Excise Compliance Services in Dubai
To fulfill their tax obligations competently and correctly, businesses can seek the support of professional tax consultants like Shuraa Tax who offer a range of Excise Compliance Services Dubai. These include:-
- Excise Tax Registration – Helping companies register with the FTA and making sure that all necessary documents are in place.
- Excise Tax Return Filing – Preparing and submitting timely returns for Excise Tax to the FTA to minimize the risk of penalties and interest charges.
- Excise Tax Audits – Conduct thorough audits for Excise Tax and identify potential areas of improvement, thereby making sure that the company is compliant with FTA regulations.
- Excise Tax Advisory – Providing expert advice and guidance on all matters related to excise including product classification, tax calculations, and dispute resolution.
- Excise Tax System Implementation – Implementing robust Excise Tax systems and processes within the organization in order to streamline its operations and enhance efficiency.
- Excise Tax Calculation – Helping businesses calculate their tax liability and ensuring timely payments.
Need for Excise Compliance Services Dubai
Excise tax compliance can be tough as well as long drawn out. Nonetheless, any failure in this regard can result in significant penalties and fines. On the other hand, availing excise compliance services Dubai can help in many ways:
- Minimize Tax Liabilities – Accurate calculations and timely payments of taxes to avoid penalties.
- Prevent Risks and Disputes – Reducing the risk of audits and disputes through proactive compliance.
- Focus on Business – Experts take care of the excise tax compliance while the company focuses on core business activities.
- Stay Updated – Proper knowledge of the latest excise tax regulations and changes.
Excise tax compliance procedure
There is a systematic approach followed by excise compliance service providers:
Initial assessment – Evaluating business operations and identifying specific Excise Tax requirements of the company.
Registration and setup – Registering with the FTA as per the excise tax regulations.
Data collection and analysis – Accumulating relevant financial data and analyzing it to determine the tax liability of the company.
Return preparation – Preparing accurate and timely Excise Tax returns.
Filing and payment – Submitting the returns to the FTA and ensuring timely payment of taxes.
Ongoing support – Extending ongoing support and guidance to address all Excise Tax-related queries and problems.
Significant records for Excise tax compliance in the UAE
According to UAE’s Excise Tax Law, the taxable entities are required to maintain the following documents and statements for one year prior to tax implementation –
- Documents supporting all imported, manufactured, or stored Excise goods
- Documents supporting the sale or export of excise goods outside the UAE
- Detailed statement of physical inventory held by the taxable entity
- Record of lost or destroyed excise goods
- Taxes due on goods imported/manufactured by the taxable entity in the UAE
- Taxes due on goods purchased or produced for stockpiling.
- Tax deducted on tax paid and submitted on goods sold outside the UAE
- Item-wise details(value and quantity) of excise goods physically kept by the taxable entity
- Details of average monthly inventory held by the taxable entity
- Details of average monthly sales for each excise item
- Details of excise products manufactured by the taxable entity
- Details of excise products purchased or imported by the taxable entity
- Item-wise details of goods produced and imported
- Item-wise details of goods sold locally and outside the UAE
- Item-wise details of goods released from the specified designated zone
- Details of the companies and retailers to whom the excise products are sold
Tax compliance and penalties:-
- FTA can conduct audits of taxable businesses and impose penalties if found non-compliant.
- The database of the FTA is linked to the customs department. Hence, it is easy to identify the taxable items under the excise list with the help of item codes.
- If not registered with the FTA, importers cannot clear any of the taxable items through customs.
- If companies fail to register for excise duties within the deadline, they may be subject to a penalty of AED 20,000.
- If businesses fail to register excess existing stocks of taxable items, they might be subject to a penalty of AED 20,000.
- Businesses that fail to display prices inclusive of tax will have to pay a penalty of AED 15,000.
- If companies fail to comply with conditions and procedures related to the transfer of excise goods in designated zones, they may have to pay a fine of AED 50,000 or 50% of the tax.
Connect with the team of Shuraa Tax and ensure timely compliance with excise tax in the UAE.
Conclusion
Shuraa Tax and Accounting Consultancy has an extended team of experienced accountants, auditors, and tax consultants who are committed to providing comprehensive taxation services to businesses in the UAE. Through their in-depth knowledge and expertise in excise tax compliance, they will make sure that companies maintain full adherence to the tax laws of the UAE and stay secure from potential risks and penalties.
