Excise Tax came into effect on 1 October 2017 based on Federal Decree-Law No. (7) of 2017 on Excise Tax.

The following goods are subject to excise tax in the UAE at the following rates of tax:

Carbonated drinks – 50%
Energy drinks – 100%
Tobacco – 100%

Excise Tax is calculated based on the excise price. The excise price is the higher of the price published by the FTA in a standard price list if available and the designated retail sales price for the excise good less the tax included therein.

The following groups are required to register for excise tax:

Producers of excise goods.
Importers of excise goods.
Stockpilers of excise goods.
Warehouse keepers supervising designated zones for Excise Tax purposes (where applicable).
 

Businesses that are required to pay excise tax should do the following:

Register with the FTA;
Submit excise tax returns on a monthly basis; and
Pay the excise tax due on the same date as submitting a tax return.

A stockpiler is a person that owns excise goods and cannot prove that excise tax has previously been paid on those goods.

Excise Tax is due when goods are ‘released for consumption’ i.e. when they enter free circulation in the UAE. Excise tax is due when:

Excise goods are imported into the UAE;
Excise goods are released for consumption in the UAE (e.g. manufactured and released from a designated zone/excise warehouse etc); or
Excise goods are acquired by a stockpiler, where tax has not previously been paid on these goods.
 

Excise tax is not a transaction-based tax, which means that goods do not need to be sold in order for the tax to be due.

A designated zone is the term used in the UAE to describe a specified area that is considered outside the UAE for excise tax purposes.

For an area to be treated as a designated zone, it must be officially registered and approved by the FTA and a warehouse keeper must be appointed as responsible over the designated zone.

A designated zone should be a fenced area intended to be a free zone that cannot be entered or exited except through a designated road and any area designated by the FTA as being subject to the supervision of a warehouse keeper.

A designated zone should be a fenced area intended to be a free zone that cannot be entered or exited except through a designated road and any area designated by the FTA as being subject to the supervision of a warehouse keeper.

Unlike VAT, excise tax is paid once in the supply chain and businesses that have purchased excise goods cannot obtain a refund of the excise tax paid on those goods.

There are a limited number of cases where a refund of excise tax will be available. Those cases are:

When excise tax has been paid on an excise good, which is then produced in to a ‘new’ excise good, on which excise tax is again due;
When excise tax has been paid on an excise good that is then exported outside the UAE; or
When amounts have been paid to the FTA in error.
 

In the above cases, a business registered for excise tax will be entitled to a refund of the excise tax paid. The refund will be granted by allowing a deduction of the refundable amount from the tax due in the next excise tax return period.

There are also a limited number of cases where refunds will be available to people who are not registered for excise tax. Those cases are:

Where excise tax has been paid by certain international governments, diplomatic missions and international organisations in the course of their official activities, where a reciprocal agreement is in place between the UAE and the entity’s home country; and
Where excise tax has been paid in the UAE by a person who is registered for excise tax in another GCC country that is implementing excise tax and who has then exported the excise goods out of the UAE and paid excise tax in that other GCC country.
A refund request form will be available on the FTA website that can be used to request refunds.

Travellers entering the UAE with excise goods for non-business purposes will not be required to register as an importer of excise goods.

Travellers may need to pay the excise tax due on the goods depending on the value of the goods being imported. Where the value of the goods is below the threshold for exemption from Customs Duty as per the Customs Laws, no excise tax is due.

Where the value of excise goods exceeds the value of the exemption for Customs Duty purposes, then excise tax will be due on the total value of the goods.

Physical payment of excise tax will be required before or at the time of import. Further details on the obligations of travellers or non-registered persons bringing excise goods into the UAE can be found in the Excise Tax Importers User Guide available on the FTA’s website.