- Zabeel Street, AL Karama, Dubai, United Arab Emirates
- +971 4 27164 24
Excise Taxes
Excise Taxes
Excise Tax and Value Added Tax VAT are two types of indirect tax that are different processes in the UAE; they have procedures and implementation styles.
- Scope and Application: Excise Tax is tax imposed on goods which are harmful to the human health or to the environment. They are tobacco and tobacco products, fizzy drinks, energy drinks, sweetened drinks, electronic cigarettes, vape-related liquids, and other liquids one can smoke using a vape.
- Registration and Payment: Organizations engaged in importing, manufacturing, de-controlling of excise items at authorised regions, or storing excise items have to be registered with the Federal Tax Authority (FTA). The Excise Tax is usually paid by the importer, producer, or stockpiler when the product gets out at the point of importation, production, or release to be used. This tax is comprised in the sale price of the goods and it is not subjected at each level 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: Exercise Tax is imposed on a list of harmful goods only, but VAT is a wider consumption tax imposed on most of the goods and services
- Tax Rates: The rate of excise Tax is considerably high (up to 100% ) as compared to the standard level of VAT that is 5%
- Application Points: Normally, Excise Tax is paid once at the moment of import, production or introduction to the consumption, and VAT is imposed on every step of supply chain
- Registration: Although both taxes need to be registered with the FTA, the process of registration of the Excise Tax is characterized by specification of a kind of excise goods and the role of the business (importer, producer, etc.).
VAT
- Scope and Application: VAT is a type of consumption tax that is imposed on supply of most goods and services. It is normal at 5% whereas other items and services are zero-rated (examples of zero-rated goods and services include certain health and educational services, exports) or exempt (examples of exempt goods and services include 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 short, the Excise Tax in the UAE is a narrow tax of selected harmful products, with much higher taxation levels and narrower application range than VAT, i.e., a broader consumption tax on the majority of goods and services.