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Excise Tax UAE | UAE Excise Tax Law Rules & Regulations

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We Provide Here a Detailed Summary of the UAE Excise Tax Legislation (Excise Tax Law UAE) and UAE Excise Tax Rules and Regulations

Here below (SCROLL DOWN) follows what is essentially an article-by-article Summary of the UAE Excise Tax Legislation (“The UAE Excise Tax Law’) we prepared for You. Its purpose is to have in one document a ‘quick’ and easy to read and understand summary that can help you quickly understand the main and ALL provisions of the new UAE Excise Tax Law and implement Excise Tax for your UAE Business … without going ‘straight into’ the UAE Excise Tax Law itself.

In format it follows the actual numbering found in The UAE Excise Tax Law itself  so you can easily reference to the Law, if required. In language it is written in simple but somewhat technical format for the use of accountants and seasoned businessmen.

If you prefer more practical and simple to understand UAE Excise Tax Law summaries that give the same information but in more simple English then our next section below ‘Practical UAE Excise Tax Law Guides’ will be very helpful. Ideally one should read both this article-by-article summary AND the Practical Guides.

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                      General FAQs on UAE Excise Tax

Question Answer
Which goods are considered as excise goods?
  • Carbonated drinks including any aerated beverage and any powder, concentrations, extracts or gel intended to be made into an aerated beverage.
  • Energy drinks that contain stimulant substances that provide physical and mental stimulation, which include but not limited: taurine, caffeine, guarana and ginseng. Energy drinks will also be considered any powder, concentrations, extracts or gel intended to be made into an energy drink.
  • Tobacco and tobacco products as listed in Schedule 24 of the GCC Common Customs Tariff.

 

Retailers that hold stock of excise goods at the date the Excise Law will come into force, will be required to register and pay tax? No because they are not producers, importers warehouse keepers or stockpilers of excise goods. When the Law will come into force retailers will buy excise goods that are already in free circulation and on which tax has already applied and paid.
Can excise tax not be paid if excise goods are not sold for a period after being released for consumption? No as excise tax must be paid when goods are released for consumption, even if they remain unsold.
Will excise tax apply to sample of excise goods? Yes, excise goods that are given for free will be subject to excise tax.
Will excise goods released for consumption in a freezone be subject to excise tax? Yes and this will include also designated zones. For excise goods that will be used for retail sale or consumption in a freezone then the producer or importer must pay the excise tax.
Will bad debt relief be available for excise goods? No because excise tax is due when the goods are released for consumption, regardless of whether they are sold or not later by a supplier or whether a customer buying the goods paid the supplier or not.
Will travelers be required to pay excise tax? If travelers enter the UAE for non-business purposes then they will not be required to register. However if the value of the excise goods they import is above the threshold for exemption from Customs Duty, then they must pay excise tax on the total value of the goods. Further details for travelers and non-registered on how to pay excise tax will be available in due course.

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Excise Tax Law UAE – An Article-By-Article Summary

The United Arab Emirates Ministry of Finance issued the Federal Decree-Law No. (7) of 2017 on Excise Tax on its official website on 21 August 2017

Below is a summary of the main articles and provisions of the UAE Excise Tax Law:

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Article 2 – Implementations and Scope of UAE Excise Tax

The Excise Law will apply to the excise goods specified by a Cabinet Decision.

Excise tax is due on the below activities:

  • When excise goods are imported into the UAE,
  • When excise goods are produced in the UAE in the normal course of doing business,
  • When excise goods are released for consumption in the UAE from a Designated Zone,
  • When excise goods are acquired and owned by a stockpiler during the course of his business, if tax has not previously been paid on those goods.

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Article 3 – Calculation of UAE Excise Tax

The tax rates that will be imposed on excise goods and method of calculation will be provided by a Cabinet decision.

However, it is expected that the following goods will be subject to excise tax in the UAE at the following rates:

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

Excise tax will apply on the retail price of the goods.

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Article (4) – UAE Excise Tax Obligations

Any person who carries out, or is involved in any of the activities mentioned in Article 2 of the Law will be responsible for the due tax.

Therefore, the following groups will be subject to excise tax:

  • producers of excise goods,
  • importers of excise goods,
  • stockpilers of excise goods,
  • warehouse keepers in designated zones

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Article (5) – UAE Excise Tax Registration

Any person mentioned in Article 4 of the Law who carries out, or is involved in any of the activities mentioned in Article 2 of the Law will be required to register with the Federal Tax Authority (FTA) for Excise Tax purposes. Registrations will be done via an online system and are expected to be open mid September 2017.

Registration should be made within 30 days from the end of any month during which the Person carries out or intends to carry out the said activities, or from the effective date of this Law, whichever is later.

The Executive Regulations of this Law will determine the effective date of registration.

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Article (6) – Exceptions from UAE Excise Tax Registration

A person may be excepted from registration from the Federal Tax Authority, if he can demonstrate to the Authority that he will not regularly import Excise Goods.

Any person excepted from registration must notify the Federal Tax Authority if there are changes to his operations that would make him subject to Tax under the provisions of this Law, within the period of time and the procedures to be clarified by the Executive Regulation of this Law.

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Article (7) – UAE Excise Tax De-registration

A registered person shall apply to the Federal Tax Authority for deregistration if he is no longer liable for the Tax as provided under Article 4 of the Law, within the period of time as will be specified in the Executive Regulation of this Law.

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Article (8) – Registration as a Warehouse Keeper, under UAE Excise Tax Law

Any Person that operates or wants to operate a Designated Zone must apply for registration as a Warehouse Keeper in order to be responsible for the designated zone.

The Executive Regulation of this Law will specify the procedure and effective date of registration as a Warehouse Keeper.

A producer, importer or stockpiler will be able to:

  • register its own warehouse as a designated zone and
  • be appointed as warehouse keeper for that designated zone.

A warehouse keeper will be 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.

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Article (9) – Procedures, Controls and Conditions of UAE Excise Tax Registration and UAE Excise Tax De-registration

The Executive Regulation of this Law will provide the conditions and procedures of tax registration, deregistration and rejection of application for tax registration or de-registration.

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Article (10) – UAE Excise Tax Calculation Date

The date the Excise Tax shall be calculated will be the date on which the Excise goods are imported in the State or the date on which the Stockpiler acquired the goods.

If the goods were acquired before the effective date of this Law then the date of calculating the tax will be the effective date of this Law.

In addition to the above, Excise Tax shall be calculated on the date the goods where released for consumption.

It is important to note that 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.

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Article (11) – Inclusion of the UAE Excise Tax in the Advertised Price

The advertised prices of Excise goods shall be inclusive of the Tax. The Executive Regulation of this Law will provide cases where prices will not include the Tax.

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Article (12) – UAE Excise Tax Exemption

If Excise goods are exported then they will be exempt from Excise Tax.

The Executive Regulation of this Law will specify the conditions for exemption.

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Article (13) – Designated Zone under UAE Excise Tax Rules

A “Designated Zone” is a term used in the UAE to describe an area that will be treated as outside the State for tax purposes. It is also commonly referred to as excise warehouses.

For an area to be considered as a designated zone it must fulfil the conditions that will be clarified in the Executive Regulation of this Law and must officially be registered and approved by the Federal Tax Authority. The approval process will involve specifying the location and boundaries of the designated zone. The Federal Tax Authority may also specify certain levels of security and conditions that will need to be maintained in order to protect the integrity of the excise goods stored in the zone.

As an exception to the above provisions, the Executive Regulation of this Law will specify the conditions under which a business conducted in a designated zone will be treated as being conducted in the State.

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Article (14) – Transfer of Excise Goods in Designated Zones

If Excise goods are imported and immediately placed in a designated zone without being made available for free circulation, they will be treated as not imported into the UAE for excise tax purposes. Tax will only be due when the goods leave the designated zone and enter free circulation. Excise goods transferred from one designated zone to another will not be subject to tax.

The controls and conditions of the transfer of goods from and to a designated zone as well as the mechanism of storing and processing such goods therein will be provided by the Executive Regulation of this Law.

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Article (15) – UAE Excise Tax Calculation

The tax payable that will be owed by a taxable person for a tax period will be calculated as the due tax less the total deductible tax as calculated under provisions of Article 16 below.

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Article (16) – Deductible UAE Excise Tax

The following will be considered as Deductible Tax:

  • The tax paid on excise goods which have been exported,
  • The tax paid on excise goods which became a component of another excise good which is, or will become subject to the tax,
  • Any amounts paid to the Authority by mistake or error.

More about the conditions for deducting the Tax mentioned in this article will be provided by the Executive Regulation of this Law.

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Article (17) –UAE Excise Tax Period

The tax period will be specified by the Executive Regulation of this Law and in certain circumstances the Federal Tax Authority may change the tax period.

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Article (18) – UAE Excise Tax Return

A tax return must be submitted by every taxable person to the Federal tax Authority on a monthly basis.

The exact procedures and timeframe of submission will be provided by the Executive Regulation of this Law.

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Article (19) – UAE Excise Tax – Payment of Excise Tax 

The tax due as shown on the tax return shall be paid by every taxable and registered person, on the same date that the tax return is submitted as per the procedures to be provided by the Federal Tax Authority.

Any person that is excepted from registration must pay the tax due when importing the excise goods.

 

Article (20) – Excess Refundable Excise Tax

Any excess tax can be carried forward to the following tax periods and can be offset against the payable tax or any penalties imposed under this Law or the Federal Law No. 7 of 2017 on tax procedures in subsequent tax periods until this excess is fully utilized.

The above can be done in the following cases:

  • If the deductible tax as explained in article 16 of the Law exceeds the due tax for the same tax period;
  • If the tax paid to the Federal Tax Authority by a taxable person is more than the payable tax.

If any excess tax still remains after being carried forward for a period of time, then a taxable person can apply for a refund to the Federal Tax Authority, in accordance with the procedures and within the time period that will be provided by the Executive Regulation of this Law.

Article (21) – Excise Tax Refunds in Special Cases

The Federal Tax Authority may refund excise tax in the following cases and upon a refund application:

  • Where excise tax has been paid by international organizations, international governments and diplomatic missions and bodies during the performance of their business activities, provided a reciprocal agreement exists 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 state that is implementing also excise tax and who then exports the excise goods out of the UAE and pays excise tax in that other GCC state.
  • For any other persons or categories as will be provided by a Cabinet Decision.

A refund request form will be available on the FTA website.

Article (22) – UAE Excise Tax – Administrative Penalties Assessment

If the taxable person commits any of the below violations, the Federal Tax Authority will impose a penalty to the person and notify him within 5 business days from the date of issuance:

  • If the taxable person fails to display the prices of the goods inclusive of the excise tax
  • If he fails to comply with the procedures and conditions related to designated zones and the transfer of excise goods to and from designated zones and any conditions of processing and storing such excise goods.
  • If he fails to provide the list of prices of the excise goods produced, or imported or sold.

Article (23) – Instances of UAE Excise Tax Evasion

The below acts performed by a taxable person shall be deemed as tax evasion:

  • Bringing or attempting to bring excise goods in or out of the state without paying the due tax in part or in full.
  • Producing, acquiring, storing, transferring or transporting excise goods for which the due tax was not paid and there was intention to avoid paying the due tax.
  • Placing false distinguishing marks on the excise goods with the purpose to avoid payment of tax or to receive unlawful refunds.
  • Submitting wrong or unreal returns, documents or records with the purpose to avoid payment of tax or to receive unlawful refunds.

Article (24) – Record-Keeping for UAE Excise Tax

A taxable person must keep proper books and records of all actions related to excise goods such as records of production, importation, exportation or stockpiling of excise goods. Records must also be kept of stock levels and details of lost or destroyed excise goods.

In addition, tax records must be kept that show the tax due on produced, imported or stockpiled excise goods and any deductible tax according to the provisions of this Law.

The time period, conditions and provisions for the keeping of records shall further be clarified by the Executive Regulation of this Law.

Articles (25) – Stating the UAE Excise Tax Registration Number

On any correspondence and dealings with the Federal Tax Authority, on any tax returns and other documents related to tax, all taxable persons must state their tax registration number.

Article (26) – Executive Regulation for UAE Excise Taxes

The Executive Regulation of this Law will be issued by the Council of Ministers at the suggestion of the minister.

Article (27) – Revenue Sharing for UAE Excise Tax Law purposes

The Federal Government and the Emirates’ Governments based on the provisions of the Law on the establishment of the Federal Tax Authority, may share the revenue from tax and penalties collected based on the Excise Law.

Article (30) – Publication and Application of the UAE Excise Tax Law

This Excise Law will be published in the Official Gazette and will come into effect on 1 October 2017.

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