Excise Tax in the UAE: What Businesses Must Know!

Excise tax is a critical aspect of taxation in the UAE, affecting businesses that manufacture, import, or store specific goods. Understanding the tax structure, compliance requirements, and potential penalties is essential for businesses to avoid legal and financial risks.

This article provides a comprehensive overview of:

• What excise tax is and why it was introduced
• Which products are subject to excise tax
• Who must register for excise tax
• How the tax is calculated
• The penalties for non-compliance
• Key steps to ensure compliance

What is Excise Tax?

Excise tax is an indirect tax imposed on products deemed harmful to human health or the environment. The UAE government introduced this tax to reduce consumption and generate revenue for public health and infrastructure development.

Which Products Are Subject to Excise Tax?

Excise tax applies to specific goods at varying rates:

• Tobacco and related products – 100%
• Energy drinks – 100%
• Carbonated drinks – 50%
• Electronic smoking devices and liquids – 100%
• Sweetened drinks – 50%

Any business involved in the production, importation, or storage of these goods must comply with excise tax regulations.

Who Needs to Register for Excise Tax?

Businesses must register with the Federal Tax Authority (FTA) if they:

• Import excise goods into the UAE
• Produce excise goods within the UAE
• Store excise goods for commercial purposes
• Release excise goods for consumption in the UAE

Failure to register can result in significant fines and legal consequences.

How is Excise Tax Calculated?

Excise tax is based on the higher value of either:

• The retail selling price set by the business
• The official price list provided by the FTA

Businesses must maintain accurate records and ensure their pricing aligns with FTA regulations.

Penalties for Non-Compliance

Failure to comply with excise tax regulations can result in severe penalties, including:

• Late registration fine: AED 10,000
• Late tax return filing: AED 1,000 for the first offense, AED 2,000 for repeated offenses

In addition to financial penalties, non-compliance can lead to reputational damage and operational disruptions.

How to Stay Compliant

To avoid penalties and ensure full compliance, businesses should:

• Register with the Federal Tax Authority (FTA)
• Maintain detailed financial records
• File and pay excise tax on time
• Conduct regular internal compliance audits

Expert Guidance for Excise Tax Compliance

Navigating excise tax regulations can be complex, and non-compliance carries serious financial and legal consequences. AM Audit provides expert assistance to ensure businesses remain fully compliant with UAE tax laws.

For professional guidance, Contact Us.