Whether you are a business individual or public in UAE, it is important to be aware of excise tax in UAE. This tax is applied to specific products and services, and it is important to understand what is taxable and what is not. We will present an outline of UAE excise tax in this blogpost so that you are more aware of this essential factor. Also, every business owner should know what is federal excise tax and how it works in the UAE. Now let’s dive into the content to know the information in detail.

What is Excise Tax in UAE?

An excise tax is placed on some commodities that are deemed harmful to society. Tobacco goods, sugary drinks, and energy drinks are some of them that are subject to excise duty in the UAE. The tax is intended to dissuade people from consuming these products and to generate revenue for the government. 

Understand, why is excise duty charged? The excise duty is an important source of revenue for the UAE government. It is used to fund public health and education initiatives. The tax also helps to deter people from consuming harmful products.

The UAE government is committed to improving the health of its citizens and protecting the environment. The excise tax is one of the methods used to achieve these objectives.

The tax is also intended to improve public health by discouraging people from consuming products that are harmful to their health. It is estimated that the tax will reduce the consumption of sugary drinks by 10%, and the consumption of tobacco products by 5%.

The tax is levied on manufacturers, importers, and distributors of these products. The tax is then passed on to consumers in the form of higher prices.

Which Products Are Subject to Excise Tax?

The excise tax is a relatively new tax in the UAE, and it is currently under review. The tax was first introduced in 2017, and it is set to increase in 2019.
Below mentioned are the excise tax items in UAE:

Tobacco products are subject to excise tax in UAE 1

Tobacco and Tobacco
products

Carbonated Beverages are subject to excise tax in UAE 1

Carbonated
Beverages

Energy Drinks are subject to excise tax in UAE 1

Energy
Drinks

From 1 December 2019, excise was introduced on these items as well, 

  • The excise tax on sweetened beverages in UAE was introduced in 2019 and is currently set at 50%. 
  • Similarly, on liquids used in such devices and tools
  • Sweetened drinks

Scope of Excise Tax

The UAE excise tax is a sort of VAT levied on the sale of certain products and services. You must register and pay taxes if you engage in the following activities: Imported items are subject to excise duty.

  • Excise tax on imported items
  • Making or producing excise goods
  • Taking levy items outside of a Designated Zone
  • In the regular course of business, accumulating excise goods

In the UAE, you can sell excise items. The seller will bear the levy, which will be included in the total sale price of the excise product.

Rate of Excise Tax

The UAE excise tax list is as follows:

  • 50% on carbonated beverages
  • 100 % on cigarette items
  • 100 % on energy drinks
  • 100% on electronic smoking devices
  • 100% on liquids used in these gadgets and tools
  • 50% on any product containing added sugar or other sweeteners

How Excise Tax is Different From Excise Duty?

Difference between Excise Tax in UAE and excise Duty in UAE

What Are Tax Points?

The tax point is the place where goods are imported, exported or sold in the United Arab Emirates (UAE). If you are importing goods into the UAE, the tax point is the customs point of entry; if you are selling goods in a designated zone, the sales point is where the goods are delivered.

1. When excise goods are imported

When excise products are brought into the UAE, the importer is responsible for accounting for the excise duty owed on that day. However, if the products are immediately placed in a specified zone, they are not considered imports. When the items leave the specified zone and enter free circulation in the UAE, they become imports.

2. When excise goods are released for consumption

On the day the products are made available for sale in the UAE, the excise tax is due on them. The term “sale” in this context denotes either the production of these goods in free circulation, that is, outside of a designated zone or the release of such goods from a designated zone into free circulation in the UAE.

3. Stockpiled excise goods

When excise goods are stockpiled in the UAE, they are subject to excise tax if they are not allowed for free circulation in the UAE, or if excess excise goods are held in free circulation. In these cases, the stockpiled goods become subject to an excise tax on the date they are received by the stockpiler or the date when the law comes into effect, whichever is later. 

How to Calculate Excise Tax in UAE?

If you’re running a business in the UAE, it’s important to know how to calculate excise tax.

Here’s a quick guide on excise tax calculation UAE.

To calculate tax, you first need to know the tax rate. This is the percentage of the sale price that is charged as tax. The rate varies depending on the goods being taxed.

Now, understand, how is excise tax calculated.?

For example, the Designated Retail Sales Price (DSP) of an energy drink before applying the excise tax  is 5 AED – the excise tax is due at a rate of 100% of the base i.e. 5 x 100% = 5 AED excise tax. The new selling price of the energy drink is therefore 5 AED + 5 AED tax = 10 AED.

DSP* excise tax(%)= x AED

Then the new selling price,

DSP+ x AED = y AED

Once you know the tax rate, you can calculate the excise tax by multiplying the rate by the sale price of the goods.

Remember, the excise tax is applied to the sale price of the goods, not the cost of the goods. This means that if you’re selling goods that you’ve imported, you’ll need to pay tax on the sale price, not the cost of the goods.

It’s important to be aware of tax and how to calculate it. By knowing the excise tax rate and multiplying it by the sale price of the goods, you can ensure that you’re complying with the law and avoid any penalties.

Identifying the Designated Retail Sales Price

When it comes to retail sales, the Designated Retail Sales Price (DSP) is the most important factor to consider. This is the price that the manufacturer has set for the product and is generally the lowest price that the product will be sold for. 

Retailers who sell products below the DSP may be subject to legal action from the manufacturer.

To identify the DSP of a product, you’ll need to look at the price tag or other marketing materials. The DSP will be clearly marked, and it’s usually the same price no matter where you purchase the product.

If you’re considering purchasing a product, be sure to check the DSP before making your final decision. By doing so, you’ll ensure that you’re getting the best possible price.

Calculating the Average Retail Selling Price

If you’re in the business of selling products, it’s important to know what the average retail selling price is for your product. This number can help you set your own prices and know how much profit you can make on each sale.

There are a few different ways to calculate the average retail selling price. 

One method is to take the total cost of the goods sold and divide it by the number of units sold. This will give you the average cost per unit. You can then add your desired profit margin to this number to get your average retail selling price.

Another method is to take your total sales revenue and divide it by the number of units sold. This will give you the average selling price per unit. Again, you can add your desired profit margin to this number to get your average retail selling price.

Which method you use will depend on your own business and what data you have available. Whichever method you choose, calculating the average retail selling price is a helpful way to price your products and make a profit.

The Takeaway

The UAE imposes an excise tax on a variety of goods, including tobacco, energy drinks, and alcohol. This tax is in addition to standard sales tax, and it is important to understand how it applies to your business or personal finances. 

Adam Global can help you understand and comply with excise tax in the UAE.

FAQs

What is the Difference Between Vat and Excise Tax in UAE?

When it comes to taxes in the UAE, there are two main types: VAT and excise. So, what is the difference between the two?

VAT is a tax on the sale of goods and services, whereas excise is a tax on specific items. In the UAE, VAT is levied at a rate of 5%, while excise is applied to items such as tobacco, alcohol, and energy drinks.

The main difference between VAT and excise tax is that VAT is a general tax that is applied to a wide range of goods and services, while excise tax is a specific tax that is applied to certain items.

What is the Main Purpose of Excise Tax?

An excise tax is a tax on the sale of specific goods or services. The main purpose of the excise tax is to raise revenue for the government. Excise tax is also used to regulate the consumption of certain goods or services.

Some common examples of excise tax include:

Gasoline

Tobacco

Alcohol

Cigarettes

Is Excise Tax Included in VAT?

Yes, the excise tax is included in VAT. This is because excise tax is a tax on the manufacture, sale, or consumption of certain goods and services.

When is Excise Tax Paid?

Assessees should pay excise taxes on items manufactured or produced. The excise tax shall be paid on the fifth day of the following month from the day the products were taken from the factory or factory for the purpose of sale, according to Rule no. 8 of the Central Excise (Amendment) Rules, 2002.

How Does the Excise Tax Work?

The excise tax is levied on the sale of the goods, and the tax rate varies depending on the nature of goods. For example, the tax rate on tobacco is much higher than the tax rate on alcohol. The tax rate on gambling is also higher than the tax rate on alcohol.

The excise tax is a controversial tax, and there are a number of arguments for and against it. Some people argue that the excise tax is unfair because it disproportionately affects lower-income people. Others argue that the excise tax is necessary to discourage people from engaging in activities that are harmful to society.

How is Excise Tax Collected?

  • The excise tax is a tax that is levied on the manufacture, sale, or consumption of certain goods. The tax is levied on the producer or seller and is paid by the consumer. 
  • The tax is collected by the government through the use of excise inspectors. The inspectors visit businesses that are engaged in the manufacture or sale of taxable goods and collect the tax from the business. The tax is then paid to the government.
  • The excise tax is used to fund the government’s activities. The tax revenue is used to pay for the government’s expenses, such as the salaries of government employees, the construction of public buildings, and the maintenance of roads and infrastructure.
  • The excise tax is an important source of revenue for the government and helps to fund the government’s activities.

How is Excise Duty Charged?

Excise duty is a tax that is levied on the manufacture, sale or consumption of certain goods. These specific goods include luxury goods as well in addition to alcohol, tobacco and petroleum products.