Excise Tax in the UAE
For businesses and individuals navigating the vibrant economy of the UAE, understanding excise tax is crucial. Introduced in 2017, this indirect tax applies to specific goods and services consumed within the country. But fret not, this blog aims to be your friendly guide through the intricacies of excise tax in the UAE!
What exactly is excise tax?
Think of it as a levy placed on certain “sinful” or unhealthy goods, like tobacco, sugary drinks, and energy drinks. It also applies to some luxury items like cosmetics, perfumes, and certain electronic goods. The goal? To encourage responsible consumption and generate revenue for the government.
Federal Tax Authority website: https://tax.gov.ae/en/
Which goods are subject to excise tax?
The list of goods subject to excise tax in the UAE is diverse and dynamic, so it’s best to refer to the official Federal Tax Authority website for the most up-to-date information. However, here’s a breakdown of the main categories:
Sinful Goods:
- Tobacco: Cigarettes, shisha, electronic cigarettes, and liquids used in such devices.
- Sugary Drinks: Carbonated drinks exceeding 12% sugar content, energy drinks, and any sweetened drinks (juices, syrups, concentrates).
Luxury Splurges:
- Cosmetics and Perfumes: Specific categories and price points are subject to varying rates.
- Electronics: Certain high-end televisions, cameras, and other electronic goods fall under the excise tax umbrella.
How is excise tax calculated?
In the UAE, excise tax is calculated in two ways, depending on the type of good:
Specific Method:
This method applies a fixed tax rate per unit of the product. For example:
- Cigarettes: AED 0.4 per cigarette
- Energy drinks: AED 0.1 per milliliter
- Shisha tobacco: AED 10 per gram
Ad Valorem Method:
This method applies a percentage tax rate to the product’s retail price. For example:
- Carbonated drinks (exceeding 12% sugar content): 50% of the retail price
- Cosmetics and perfumes: Varying rates depending on category and value (e.g., 5% for some perfumes, 10% for luxury cosmetics)
- Certain electronic goods: Varying rates depending on category and value (e.g., 5% for some televisions, 10% for high-end cameras)
Here’s how the calculation works in each method:
Specific Method:
- Tax amount = Tax rate per unit x Number of units
Ad Valorem Method:
- Tax amount = Retail price x Tax rate
So, if you buy a pack of 20 cigarettes with a tax rate of AED 0.4 per cigarette (specific method), the excise tax would be:
- Tax amount = AED 0.4/cigarette x 20 cigarettes = AED 8
And if you buy a carbonated drink with a retail price of AED 5 and a tax rate of 50% (ad valorem method), the excise tax would be:
- Tax amount = AED 5 x 50% = AED 2.5
Cabinet Decision No. 52 of 2019 on Excise Goods, Excise Tax Rates and the Methods of Calculating the Excise Price: https://tax.gov.ae/en/taxes/excise.tax.aspx
Disclaimer: Above all information is for general reference only and sourced from internet, before making any kind of decision please visit the authorized websites of authorities and service providers.