How to Ensure Compliance with UAE Excise Tax Amendments
The UAE’s excise tax system, first introduced in 2017, has undergone several amendments to align with the evolving economic landscape and public health objectives. As businesses strive to stay compliant with these changes, it is crucial to understand the intricacies of the excise tax, its purpose, and the recent amendments that could impact operations. This comprehensive guide aims to help businesses navigate the complexities of the UAE excise tax system and ensure full compliance.
What is Excise Tax in the UAE?
Excise tax in the UAE is a form of indirect taxation imposed on specific goods that are deemed harmful to human health or the environment. This includes products such as tobacco, energy drinks, carbonated beverages, and more recently, electronic smoking devices and sweetened drinks. Introduced on October 1, 2017, the excise tax was implemented as part of the UAE government’s broader strategy to discourage the consumption of harmful products and to generate additional revenue for the state.
Goods Subject to Excise Tax
The goods subjected to excise tax, often referred to as “excise goods,” are:
Carbonated Drinks: This includes all aerated beverages except for unflavored aerated water. Concentrates, powders, gels, and extracts intended to be made into carbonated drinks are also included.
Energy Drinks: These are beverages marketed as energy-boosting, containing stimulant substances such as caffeine, taurine, ginseng, and guarana. This category also includes any concentrations, powders, gels, or extracts intended for making energy drinks.
Tobacco Products: All tobacco and tobacco-related products listed under Schedule 24 of the GCC Common Customs Tariff.
Electronic Smoking Devices: Including all tools used for electronic smoking and liquids used in such devices.
Sweetened Drinks: Any product with added sugar or other sweeteners, whether in solid or liquid form.
Excise Tax Rates
As per the most recent amendments, the excise tax rates in the UAE are:
- 50% on carbonated drinks.
- 100% on tobacco products.
- 100% on energy drinks.
- 100% on electronic smoking devices and liquids used in these devices.
- 50% on products with added sugar or other sweeteners.
These rates were established under Cabinet Decision No. 52 of 2019 on Excise Goods, Excise Tax Rates, and the Methods of Calculating the Excise Price. The goal is to reduce the consumption of harmful products by making them more expensive and less accessible.
Purpose Behind the UAE’s Excise Tax
The UAE government introduced excise tax primarily to curb the consumption of products detrimental to health and the environment. The tax serves a dual purpose: promoting public health and generating revenue for the government.
Promoting Public Health
By imposing higher taxes on unhealthy products, the government aims to deter consumers from purchasing these goods. The increased prices are intended to reduce demand, ultimately leading to healthier lifestyle choices among the population.
Revenue Generation
The revenue generated from excise tax is reinvested into public services that benefit the wider community. This includes healthcare, infrastructure, and education, aligning with the UAE’s broader economic and social development goals.
Key Amendments to the UAE Excise Tax Law
Since its inception, the UAE excise tax law has undergone several amendments to broaden its scope and enhance compliance mechanisms. Staying updated with these changes is vital for businesses to avoid penalties and ensure adherence to the law.
Introduction of New Excise Goods
One of the significant amendments was the inclusion of electronic smoking devices, liquids used in these devices, and sweetened drinks to the list of excise goods. This change, effective from December 1, 2019, was aimed at addressing the rising consumption of e-cigarettes and sugary beverages, both of which pose significant health risks.
Adjustments to Excise Tax Rates
The tax rates have also been revised to reflect the growing concerns over public health. For instance, the 50% tax on sweetened drinks is a clear indication of the government’s focus on reducing sugar consumption, which is linked to various health issues such as obesity and diabetes.
Enhanced Compliance Measures
The Federal Tax Authority (FTA) has introduced stricter compliance measures to ensure that businesses accurately report and pay their excise tax obligations. These measures include more rigorous audits and the imposition of penalties for non-compliance.
How to Register for Excise Tax in the UAE
For businesses involved in the import, production, or stockpiling of excise goods, registration with the FTA is mandatory. The process is straightforward, but it requires careful attention to detail to avoid delays or penalties.
Step-by-Step Registration Process
Create an Account on the FTA Portal: Businesses must first sign up and create an account on the FTA’s e-services portal.
Complete the Registration Form: Fill out the excise tax registration form with accurate details about the business and the excise goods involved.
Submit Supporting Documents: Provide the necessary documentation, including trade licenses, proof of authorized signatories, and details of the excise goods.
Await FTA Approval: After submission, the FTA will review the application and, upon approval, issue a tax registration number (TRN).
No Registration Threshold
It’s important to note that there is no minimum threshold for excise tax registration. Any business that deals with excise goods must register, regardless of the volume of goods handled.
How to File Excise Tax Returns
Once registered, businesses are required to file their excise tax returns regularly. This involves calculating the tax due on excise goods and submitting the returns through the FTA portal.
Filing Deadlines
Excise tax returns must be filed by the 15th day of the month following the end of the tax period. For example, if the tax period ends in January, the return must be filed by February 15th.
Payment of Excise Tax
After filing the return, businesses must pay the excise tax due. The payment can be made through the FTA’s EmaraTax platform, which integrates with the UAE Central Bank and UAE PASS for a seamless experience.
Consequences of Non-Compliance
Failure to comply with the UAE excise tax law can result in severe penalties, including fines and potential legal action. The FTA has the authority to conduct audits and impose penalties on businesses that fail to register, file returns, or pay the due tax.
Penalties for Non-Compliance
Penalties can include:
- Late Registration Penalty: A fine imposed for failing to register for excise tax on time.
- Late Filing Penalty: A fine for not submitting excise tax returns by the deadline.
- Incorrect Filing Penalty: A fine for errors or inaccuracies in the tax return.
- Late Payment Penalty: A fine for not paying the excise tax by the due date.
FTA Audits
The FTA conducts audits to ensure compliance with excise tax regulations. Businesses found to be non-compliant during an audit may face additional penalties and legal consequences.
Tips for Ensuring Compliance with UAE Excise Tax
Ensuring compliance with UAE excise tax involves staying informed about the latest amendments, maintaining accurate records, and filing returns on time. Here are some practical tips for businesses:
Stay Updated on Tax Law Amendments
Tax laws in the UAE are subject to change, so it’s crucial to stay informed about any amendments that could impact your business. Regularly check the FTA website and consult with a tax advisor to ensure compliance.
Maintain Accurate Records
Keep detailed records of all transactions involving excise goods, including invoices, receipts, and shipping documents. This will help in accurately calculating the excise tax due and provide necessary documentation during an FTA audit.
Consult with a Registered Tax Agent
Working with an FTA Registered Tax Agent can provide valuable guidance in navigating the complexities of excise tax. A registered agent can assist with registration, filing, and ensuring that your business remains compliant with all tax obligations.
NOKAAF Auditors: Your Trusted FTA Registered Tax Agency
We are excited to announce that NOKAAF Auditors has officially become an approved tax agency with the Federal Tax Authority (FTA) in the United Arab Emirates! This recognition marks a significant milestone for our firm, highlighting our dedication to delivering top-tier tax services and ensuring compliance with UAE tax regulations.
Meet Noor Karim Afridi: FTA Registered Tax Agent and Managing Partner
Noor Karim Afridi, the Managing Partner at NOKAAF Auditors, is a distinguished FTA Registered Tax Agent, renowned for his expertise in tax advisory services. With extensive experience and a deep understanding of UAE tax laws, Noor has successfully led NOKAAF Auditors in providing personalized and expert tax solutions tailored to meet the unique needs of our clients.
Under Noor’s leadership, NOKAAF Auditors has earned a reputation for excellence in handling complex tax scenarios, ensuring that our clients remain compliant with the evolving UAE tax regulations. His commitment to delivering high-quality services makes him a trusted advisor in the field, guiding businesses through the intricacies of the UAE tax system with confidence and precision.
As an FTA Registered Tax Agency, NOKAAF Auditors is now even better equipped to assist our clients with their tax-related needs, offering reliable, compliant, and expert advice every step of the way.
Conclusion
Compliance with the UAE’s excise tax law is not only a legal requirement but also a crucial aspect of responsible business operations. By understanding the excise tax system, staying updated on amendments, and following best practices, businesses can avoid penalties and contribute to the UAE’s public health and economic objectives. With the support of a trusted tax agency like NOKAAF Auditors and the expertise of professionals like Noor Karim Afridi, businesses can navigate the complexities of the UAE tax system with confidence and ensure they remain compliant with all regulatory requirements.
FAQs (Frequently Asked Questions)
Frequently Asked Questions about Chartered Accountants in Dubai
The UAE excise tax is designed to reduce the consumption of goods that are harmful to human health or the environment, such as tobacco, energy drinks, and sweetened beverages. It also serves as a source of revenue for the government, which is used to fund public services.
Excise tax applies to carbonated drinks, energy drinks, tobacco products, electronic smoking devices, liquids used in such devices, and any product with added sugar or sweeteners. The tax rates range from 50% to 100% depending on the product category.
Businesses that fail to comply with UAE excise tax regulations may face severe penalties, including fines, audits, and possible legal action by the Federal Tax Authority (FTA). Compliance is critical to avoid these consequences.
Businesses should stay informed about the latest tax amendments and ensure accurate registration, filing, and payment processes. Partnering with a reputable tax agency like NOKAAF Auditors, which is an FTA Registered Tax Agency, can help ensure full compliance.
NOKAAF Auditors, led by FTA Registered Tax Agent Noor Karim Afridi, provides expert tax advisory services, helping businesses navigate the complexities of UAE excise tax regulations. They offer personalized guidance and support to ensure businesses remain compliant with all legal requirements.
Businesses must file their excise tax returns by the 15th day following the end of each tax period. Filing returns accurately and on time is crucial to avoid penalties and maintain compliance with FTA regulations.
