Federal Decree-Law No. (7) of 2017 on Excise Tax, U.A.E has been issued and states that it comes into effect on 1 October 2017.
Excise Tax is a form of indirect tax levied on specific goods. These goods are typically those that are harmful to human health or the environment. The intent of the tax is to reduce consumption of these commodities while also raising revenues for the government that can be spent on beneficial public services.
What is subject to an Excise tax?
In UAE, Excise Tax will apply to the following excise goods:
• Tobacco products @ 100%
• Carbonated drinks @ 50%(excludes sparkling water)
• Energy drinks@ 100%
When are the specific goods subject to an Excise tax?
Tax shall be imposed on the following activities related to Excise Goods:
a. Production of Excise Goods in the State, where such production was in the course of doing business.
b. Import of Excise Goods.
c. Release of Excise Goods from a Designated Zone.
d. Stockpiling of Excise Goods in the State, where such Stockpiling was in the course of doing business.
Which Excise goods are exempt?
a. Excise Goods that are exported shall be exempt from tax.
b. Goods may be transferred from one Designated Zone to another without being subject to Tax. The Executive Regulation of this Decree-Law shall specify the controls and conditions of the transfer of goods from and to a Designated Zone as well as the mechanism of preserving, storing and processing such Excise Goods therein.
Will Excise goods released in the free zone for consumption exempt?
Goods released for consumption in a freezone will be subject to the excise tax. This includes any freezone that may also be registered as a designated zone. If goods are held out for retail sale, or intended for consumption within a freezone, an excise tax will need to be paid by the importer or producer that ‘released’ the goods.
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