An excise tax is an international tax that is imposed on specific items or services at purchase.Those items and services are typically harmful to the human and environment such as alcoholic products, tobacco products, motor fuel, airline tickets, and other several goods and services.
Overall, excise taxes are paid by the consumers and consumers may or may not know the actual cost of excise. Although merchants are responsible to pay these taxes and they impose excise taxes later on consumers. Excise taxes increase overall retail prices. Provincial or local governments are authorized to institute excise taxes. Excise taxes help to increase the total revenue for the governments.
Currently Excise Tax in UAE is imposed on the following products.
- Tobacco Products
- Carbonated Drinks (Excludes sparkling water )
- Energy Drinks
The purpose of Excise tax is to reduce the consumption of those products while also generate the revenue for the government that can be spent on the public services.
Excise Tax Rate in UAE
As per Cabinet Decision No. 52 of 2019, the rate of the excise tax is as follows:
50% on carbonated drinks
100% on tobacco products
100% on energy drinks
100% on electronic smoking devices
100% on liquids used in such devices and tools
50% on any product with added sugar or other sweeteners.
Why Government Impose Excise Tax?
The UAE Government wants to discourage the consumption of unhealthy and harmful commodities. The excise tax is imposed on unhealthy and harmful products to make it expensive for the consumers and they get discouraged to consume. Another purpose is to increase the revenue of the government that can be spent for the betterment of public services.
Excise Tax Registration in UAE
A business needs to register for excise tax if it performs at least one of the following activities:
- If a business imports goods into the UAE.
2. If a business produces excise goods.
3. If a business stockpiles in the UAE.
4. If there is a release of excise goods from the designated zone.
How to register for excise tax in UAE?
You can visit the e-services section of the FTA website and can register your business for excise tax. However, first, you need to sign up and create an account there.