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Excise Tax UAE and Its New Amendments

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The UAE Federal Tax Authority (FTA) has implemented new procedures to make it easier for tax registrants to submit reconsideration applications and objections to the FTA's decisions, as well as procedures for implementing the Tax Dispute Resolution Committee's (TDRC) decisions, appeal procedures, controls to reduce administrative penalties, payment of penalties over time, and exemption from penalties.

What is Excise Tax In UAE & what are the latest amendments?

Excise tax is defined as an indirect tax paid on things that are damaging to human health and the environment. Pigouvian taxes or sin taxes are the names given to excise taxes throughout history. The aim of the excise tax in the UAE, on the other hand, is to reduce the usage of unhealthy and dangerous goods. The excise tax in the UAE is a small portion of the overall government revenue. The funds raised are used for supporting numerous beneficial projects for the public.

What are the items that fall under the Excise tax in the UAE?

Tobacco and tobacco products
Electronic smoking devices and tools
Liquids used in electronic smoking devices
Carbonated drinks
Energy drinks
Sweetened beverages

Businesses that engage with the import, production, sales, and storage of the above items are required to register for Excise Tax and comply with its regulations. Excise tax filing is an important aspect of tax reporting, and taxable persons must be precise in their declarations and excise tax filing.

What is the tax rate on excise goods?

Excise Items	Tax Rate
Sweetened Beverages	50%
Carbonated drinks	50%
Electronics smoking devices and the refill liquid	100%
Energy Drinks	100%

How to calculate the UAE Excise?

On April 28th, 2021, the Federal Tax Authority published Decision No. 1. Keeping that in mind, changes were made accordingly to the calculation of the Average Retail Selling Price of Excise Goods in the UAE. The judgment covers both scenarios of excise items in the UAE.

Calculation of the Average Retail Selling Price (ARSP) in the UAE.
The calculation of ARSP of excise goods that are not meant for sale in the UAE.

Here is how you should calculate the Average Retail Price as per Article 1 for excise goods that you will sell in the UAE retail market.

Step 1: The taxable party must identify the excitable goods' retail selling price (RSP) for the past 12 months to calculate the average retail selling price of the goods. There must be no VAT or Excise tax included in the valuation at this point.

Step 2: Divide the total estimated revenue for the previous 12 months by the total number of excise goods sold during that period.

Step 3: Calculate the total excise tax due on the revenue produced from the sale of excise items in the UAE by computing the excise tax on a single unit.

Step 4: This will calculate the average retail selling price of the excisable goods in the market before VAT.

Similarly,

Article 2 says excisable goods that are not meant for retail sale in the UAE. Such goods have different charges attached to their imports, customs fees, shipping costs, insurance fees, and expenses on importing such goods in the UAE. These fees directly impact the average retail price of excisable goods.

Scenario 1: If the imported goods are excisable but not for retail sale, but are used to make goods that are subject to the excise tax, the ARSP of the product is decided by the import value of the original excise good.

Scenario 2: When products are imported into the UAE but will be exported without being sold in the UAE's retail market, the ARSP for excise duty on such products is calculated by the retail price of the good that will be exported.

Scenario 3: Goods manufactured in the UAE are part of excisable goods. Nevertheless, they are not sold for retail purposes in the UAE. The price at which the goods are manufactured before any discounts or offers decides the average retail selling price of the goods.

Things that a taxable person must be aware of the Excise Tax UAE Calculations

The new excise calculation revisions make it easier to comprehend how to approach items that are meant to be sold in the UAE or exported. By assessing the influence of indirect taxes on your business in the UAE, Alchemist Accounting will help you learn how your firm can benefit from having improved cash flows. Any modifications that would impact the assessment of the ARSP of the items should be reported to the FTA. Get expert financial and accounting services to avoid any penalties. Contact us today to know more.