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EXCISE TAX REGISTRATION AND PENALTIES

07-11-2017

WHAT IS EXCISE TAX?

Amongst the several legal reforms that the United Arab Emirates government has introduced in 2017 is Royal Decree No. 7 of 2017 on Excise Tax. The government defines Excise Tax as a form of indirect tax, imposed on specific goods, which are harmful to health and the environment. Through implementing Excise Tax, the government has expressed its aim to reduce consumption and use of such goods and direct the raised revenue towards beneficial public services.

Per the law, the goods subject to Excise Tax fall under three main categories:

  1. Carbonated drinks (50% Excise Tax rate): All fizzy drinks, including any concentrations, powder, gel, or extracts intended to be made into an aerated beverage. The only exception is unflavored sparkling water.
  2. Energy drinks (100% Excise Tax rate): Any beverage which is marketed or sold as an energy drink and contains substances that provide mental and/or physical stimulation, including - but not limited to - caffeine, taurine, ginseng and guarana.
  3. Tobacco and tobacco products (100% Excise Tax rate): All items listed within Schedule 24 of the GCC Common Customs Tariff.

WHO DOES EXCISE TAX APPLY TO?

All businesses that produce, import, or store carbonated drinks, energy drinks or tobacco products in the UAE must abide by Federal Law No. 7 of 2017 on Excise Tax. Failing to comply with the law may result in penal measures imposed by the Federal Tax Authority (“FTA”), which also has authority to conduct audits.

In order to continue regular conduct and flow of business, the following individuals and businesses are advised to consider their accountability for registering, filing, and paying Excise Tax and accordingly, ensure their registration with the FTA, maintain detailed records, and submit the required declarations to the relevant authorities.

Producers:
Producers of carbonated drinks, energy drinks, or tobacco products within the UAE. Unregistered producers may be prevented from producing excise goods until registered and may be penalized for late registration.

Importers:
Importers of carbonated drinks, energy drinks, or tobacco products.  In order to clear goods, the Customs Department requires import declarations to be submitted prior to import for verification.

Stockpilars: Any businesses in the UAE - including but not limited to shops, restaurants and hotels - which own a stock of carbonated drinks, energy drinks, or tobacco must prove it is not a Stockpilar. Unregistered businesses that account as Stockpilars may be subject for late registration penalties and may be prevented to make supplies of excess excise goods until registered.

HOW CAN THE LEGAL GROUP HELP?

The Legal Group’s Corporate and Commercial Department is pleased to assist individuals and businesses of all types in ensuring timely and organized legal compliance with the new law. The TLG Corporate team may assist in verifying accountability for Excise Tax, carrying out registration, completing and submitting documents for filing, coordinating with the relevant authorities, and overseeing any delay penalties.