22 Mar 2022
According to the Yale University Research Center, a single serving (710 ml) of energy drink could harm your heart. In the same way, carbonated drinks have brought issues in health. For example, in UAE, 19,3% of the population between the ages of 20 and 79 have diabetes type 2. According to the International Diabetes Federation (IDF), the prevalence of diabetes in the UAE could double in 2040 if no actions are taken. Consequently, to this health problem, The UAE government decided to put the excise tax on some goods that are harmful to the health or the environment. The excise tax was introduced in UAE with the Federal Decree-Law Number 7 of 2017, and it is considered an indirect tax. The entity in charge of managing and collecting federal taxes and related fines, distributing tax-generated revenues, and applying the tax-related procedures in force in the UAE is the Federal Tax Authority (FTA). His headquarter is in Abu Dhabi. The Federal Decree-Law No 13 of 2016 established the FTA.
The Federal Decree-Law Number 7 of 2017
First, the excise goods are commodities that will be determined as being subject to Tax by a Cabinet Decision upon the minister’s recommendation. The primary purpose of establishing an Excise tax is to reduce the consumption of unhealthy and harmful goods for the environment and human beings and increase government incomes to cover public service fees. The Federal Decree-Law Number 7 of 2017 states in article 2 the activities related to excise goods that the Tax shall impose are:
- Production of the excise goods in the State.
- Import of excise goods
- Release of Excise goods from a designated zone.
- Stockpiling of excise goods in the State. Otherwise, it is considered excise goods, the products that are under these categories:
- Energy drinks: those that have stimulating substances, such as caffeine, guarana, taurine, and ginseng. These drinks provide mental and physical stimulation.
- Carbonated drinks: except unflavored aerated water.
- Tobacco, tobacco products, and devices.
In October 2017, approximately 1,700 products were subject to the excise tax, with 60 percent being included in soft drinks, 26 percent on tobacco, and 14 percent on energy drinks. From 1st December 2019, according to the Cabinet Decisions No. 52 and 55 of 2019, the Excise Tax will be cover too sweetened drinks, electronic smoking devices, and tobacco products. Additionally, Cabinet Decision No 52 establish the following rates:
- 50% on carbonated drinks;
- 100% on tobacco products;
- 100% on energy drinks;
- 100% on electronic smoking devices;
- 100% on liquids used in such machines and tools; and
- 50% on any product with added sugar or other sweeteners.
The Process of Charging Excise Tax Registration for Excise Tax
The responsibility of registering in the Excise Tax corresponds to the business, You can also approach tax lawyers in UAE and the FTA could provide support and guidance in registering. On the FTA website, through the e-services section, companies can register for excise tax. For the business that does not comply with conditions and procedures related to the transfer of excise goods in designated goods, the penalty shall be higher of AED 50,000 OR 50% of the tax, if any, unpaid of the goods the violation.