Complete guide regarding Excise Taxation in UAE
To explain and define excise tax, we’d say it’s an international legislated tax on certain services and goods, namely alcohol, tobacco, and fuel implied by the government on the citizens for their good. However, this international excise tax system doesn’t apply to the country as a whole or borders, but within a government infrastructure and is gathered for services like tobacco, airline tickets, motor fuel sales, and other similar ones.
These taxes are either paid by merchants who pass them on to consumers or sometimes by consumers directly. To describe how the excise tax system works exactly, we’d suggest calling it a business tax. We all are aware of the income tax, excise tax also forms a portion of a revenue generator.
The business collectors of these taxes are required to do the job remaining under the obligations applied to them. These excise taxes, after being collected, are then passed on to the local government and state. The excise tax imposed on manufacturing goods often falls into two main categories, namely either Ad valorem and Specific.
Ad valorem is a fixed percentage of charges on services and goods, and Specific is like a fixed amount of currency. However, these charges will be applied according to the quality of the products that one purchases.
„Excise tax consultants”
Just like any other complicated procedure, excise taxation also has consultants and excise tax agents for you to provide and offer expertise and good advice. A good excise tax consultant is expected to do the same and basic advice and guide on the complexities and complications regarding excise taxes.
Their services can include consulting, tax system implementations, registrations, and compliance, refund opportunities and planning, disputes and representation, due diligence, and CPE training. The taxpayers are often met with very complicated regimes that necessitate or demand detailed description and understanding that are provided by excise tax agents and consultants.
.
Since it’s a complex procedure, the companies overpay taxes due to relying on the documents and estimated calculations. Under these circumstances, taxpayers require someone to support them amid these accessions, provide opinions and suggestions, to be defended in inspections, and represent their appeals.
Excise taxpayers also want the risk pouring on them to be also less and to prevent themselves from overpayment. Hence, all of these services are provided by an excise tax consultant.
What is excise tax in Dubai and UAE?
Just like any other responsible government, UAE, as well as aims to protect citizens from any detrimental products or goods. This is why, in the light of this initiative, the excise tax applies, from December 1, 2019, of 100 percent in UAE on electronic smoking liquids and devices.
Additionally, a 50 percent excise tax is also demanded on sweetened drinks. The aim of this imposition is to prevent citizens from consuming products harmful to their health as well as to raise revenues. These revenues are known to be ‘Rates of Excise Tax in UAE,’ collected for the purposes of spending on public services.
The source of sugar may include soft or white sugar, glucose syrup, powdered white sugar, and brown sugar. For the sweetener list, neotame, sorbitol, aspartame, saccharin, and saccharin salts qualify.
Exceptions in Sweetened Drinks
There are certain sweetened drinks that are excluded from the excise tax list and are not seen as excise goods; these may include drinks that are used for dietary purposes, any special medical or health issues, drinks that have a baby formula in them, beverages with alcohol and 75% milk or milk’s substitute.
Energy drinks that include stimulant substances. For instance, energy drinks, including ginseng, taurine, caffeine, qualify as energy drinks with stimulant substances in them. The purpose of including these drinks is because they provide physical and mental stimulation to the human body that can make the unconscious.
Tobacco and tobacco made devices and products
Electronic devices and tools used for smoking. As well as the liquid that we used in these tools and devices. This includes all smoking devices that are electronics, not just the ones with tobacco and nicotine. Similarly, liquids used in these tools fall under the same requirement. Regardless of whether they contain nicotine, tobacco, or not, they will be levied tax.
Sweetened drinks that are produced either in forms of beverages, powders, gels, extracts, concentrates, or any other such product that has sugar or source of sugar or sweetener added to it.
Rate of Excise Tax
We have already provided a rough idea of the rate of excise tax on products introduced as excise goods on December 1, 2019. However, for the rest of excise goods in the UAE, the rate is as follows:* 50% on carbonated drinks
* 50% on all products that have added sugar .
* 100% on tobacco and tobacco products.
* 100% on energy drinks.
* 100% on electronic devices used for smoking.
* 100% on liquids used in smoking devices.
Business required for the Registration of Excise tax
To be eligible to register for excise tax, UAE law regarding this says that the business must be engaged in
* importing of goods that come under the list of qualified excised goods into UAE
* manufacturing and producing these excise goods that are consumed by people
* stockpiling excise goods in UAE, in certain cases
*releasing these goods from a zone appointed as excise tax zone
* warehouse keeper; people in charge of overseeing warehouses or storage places
The overall Excise tax compliance system has been altered. As mentioned above, many additional requirements are added. Other than this, the new procedure and system demand report regarding the movement of excise goods around appointed zones, details of goods that are released from this appointed zone, who purchase these products, and shift of ownership as well.
Guide for Business regarding Excise tax Payment
After you have registered for the excise tax procedure, follow the following guide to be educated regarding the payment procedure classify, and identify whether the goods in your business are identified as excise goods by the government. For this, follow the list of excise goods above.
1) Get to know the primary conditions and requirements for the registration process to ensure you qualify as an excise taxpayer or a taxable person. Also, in the case of the warehouse, as a warehouse keeper. This will be identified overseeing the products you are dealing with
2) Identify both tax liability and trigger points that are implied on the taxpayer in the taxation process.
3) Calculate if any additional tax appears during transaction period for excise goods.
4) Assess the estimating sway over the supply chain.
5)Costing for excise tax.
6) Process readiness and ERP.
