UAE levies Excise Tax from October 01, 2017 - A Step closer to VAT

1.1) The United Arab Emirates (UAE) has recently issued Fedral Decree Law No. 7 of 2017 on implication of Excise Taxes in the state. 

1.2) The Cabinet empowered thereon has therefore issued Cabinet Decisions No. (37) and (38) of 2017 detailing description of Excise Goods, Excise Tax Rates and the Method of Calculating the Excise Price.

1.3) These procedures confirm the information previously announced that excise tax will be applicable to carbonated drinks at a rate of 50%, and energy drinks and tobacco products at a rate of 100%. It also provides details of how to calculate the value on which excise tax should be calculated, and indicates that the Federal Tax Authority (FTA) is empowered to publish a standard price list specifying the value on which excise tax should be calculated for excise goods.

1.4) The law has come into effect from 1st October 2017 on the basis of the audited accounts of record on 30th September 2017 for individuals holding such excise goods.

1.5) Excise tax would be applicable from 50% to 100% on following:

- Production of Excise Goods; 

- Import of Exercise Goods; 

- Release of Excise Goods; and 

- Stockpiling of Excise goods in the state 

1.6) Retailer until and unless considered to be a stockpiler is not liable to get himself registered under the excise tax law. A stockpiler is the one who holds the excise goods in 'excess' i.e. the excise goods owned exceeds the business monthly stock level of the past 12 months; plus if the business owns more than 2 month supply of Excise goods the same would also be considered to fall under the definition of excess goods.

1.7) The federal tax authority is expected to initiate audits under the Federal Excise Tax Law and defaulters will be subject to penalties for delayed registration and payments.