Excise Taxes

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Excise Taxes

Excise Taxes

In the UAE, Excise Tax and Value Added Tax (VAT) are two distinct types of indirect taxes, each with its own rules and applications.

Scope and Application: Excise Tax is levied on specific goods harmful to human health or the environment. These include tobacco and tobacco products, carbonated drinks, energy drinks, sweetened drinks, electronic smoking devices, and liquids used in electronic smoking devices.
Registration and Payment: Businesses involved in importing, producing, releasing from designated zones, or stockpiling excise goods must register with the Federal Tax Authority (FTA). Excise Tax is typically paid by the importer, producer, or stockpiler at the point of import, production, or release for consumption. The tax is included in the sale price of the goods and does not apply at every stage of the transaction

Rates: The tax rates for excise goods are as follows:

1 Tobacco and tobacco products: 100%

2 Carbonated drinks: 50%

3 Energy drinks: 100%

4 Sweetened drinks: 50%

5 Electronic smoking devices and tools: 100%

6 Liquids used in electronic smoking devices: 100%

Key Differences from VAT

Tax Base: Excise Tax is levied on specific harmful goods, whereas VAT is a broader consumption tax applied to most goods and services
Tax Rates: Excise Tax rates are significantly higher (up to 100%) compared to the standard VAT rate of 5%
Application Points: Excise Tax is usually paid once at the point of import, production, or release for consumption, whereas VAT is applied at each stage of the supply chain
Registration: While both taxes require registration with the FTA, the registration process for Excise Tax involves specifying the type of excise goods and the business’s role (importer, producer, etc.).

VAT

Scope and Application: VAT is a consumption tax levied on the supply of most goods and services. It has a standard rate of 5%, with some goods and services being zero-rated (e.g., specific healthcare and educational services, exports) or exempt (e.g., some financial services)
Registration and Payment: Businesses with a taxable turnover exceeding the mandatory registration threshold must register for VAT. The taxpayer deducts Input Tax from Output Tax to determine the net VAT payable to the FTA

In summary, the Excise Tax in the UAE is a targeted tax on specific harmful goods, with higher tax rates and a more limited scope than VAT, a broader consumption tax applied to most goods and services.