03312585695
81 posts
Oct 18, 2025
3:26 PM
|
Introduction to Excise Tax in the UAE
The excise tax in the UAE was introduced in October 2017 as part of the government’s commitment to building a healthier society and diversifying its revenue sources. excise tax uae Unlike Value Added Tax (VAT), which applies to a wide range of goods and services, excise tax specifically targets products considered harmful to human health or the environment, such as tobacco, sugary drinks, and energy beverages.
This tax serves two main purposes: to discourage the consumption of unhealthy products and to generate additional revenue that can be used to improve public health and infrastructure. The Federal Tax Authority (FTA) is responsible for regulating, collecting, and enforcing excise tax across the Emirates.
What Is Excise Tax?
Excise tax is an indirect tax imposed on specific goods, often referred to as “excise goods.” It is charged at the time of import, production, or when these goods are released for consumption in the UAE. The businesses involved in producing, importing, or stockpiling excise goods are responsible for paying the tax to the FTA.
However, the ultimate burden of the tax is borne by consumers, as it is reflected in the higher retail prices of the products. For instance, when you buy a can of energy drink or a pack of cigarettes, the excise tax is already included in the price.
Excise Goods and Their Tax Rates
The excise tax in the UAE currently applies to the following categories of goods:
Tobacco and Tobacco Products – 100% excise tax
This includes cigarettes, cigars, hookah tobacco, and all other products containing tobacco or substitutes. The high tax rate aims to reduce smoking rates and promote better health.
Energy Drinks – 100% excise tax
Energy drinks, which often contain high levels of caffeine and sugar, are subject to a 100% tax to limit overconsumption, particularly among young people.
Carbonated Drinks – 50% excise tax
This category includes fizzy soft drinks but excludes unflavored carbonated water. The aim is to reduce sugar intake and encourage healthier beverage choices.
Sweetened Drinks – 50% excise tax
Introduced in December 2019, this extension covers all drinks with added sugar or other sweeteners, such as juices and flavored beverages.
Electronic Smoking Devices and Liquids – 100% excise tax
To address the growing popularity of vaping, electronic cigarettes and the liquids used in them are also taxed at 100%.
How Excise Tax Is Calculated
Excise tax is calculated based on the retail selling price of the product, including customs duties but excluding VAT. For example, if a pack of cigarettes has a retail price of AED 20, the 100% excise tax would add another AED 20, bringing the total before VAT to AED 40.
Businesses must register with the Federal Tax Authority (FTA) if they engage in any activity involving excise goods, such as importing, producing, or stockpiling them. Once registered, they must file monthly excise tax returns and pay the due tax within the specified deadlines.
Excise Tax Registration and Compliance
Businesses dealing with excise goods are legally required to register for excise tax with the FTA before engaging in any related activity. The registration process is conducted online through the FTA portal and involves submitting business information, trade licenses, and product details.
Failure to register or comply with excise tax laws can result in hefty penalties, including fines for late filing, failure to pay, or incorrect tax returns. It is essential for companies to maintain proper documentation of their production, imports, and sales to ensure accurate reporting.
Impact of Excise Tax on Businesses
The excise tax in the UAE has influenced both manufacturers and retailers. Businesses have had to adjust pricing strategies, supply chains, and product offerings to comply with the new regulations.
For manufacturers and importers, the administrative burden has increased as they must register, file returns, and maintain records of excise goods. Retailers, on the other hand, have seen a shift in consumer behavior, with many customers opting for healthier and tax-free alternatives.
However, businesses that adapted quickly have found opportunities to promote healthier products and expand into low-sugar or sugar-free options, thereby meeting consumer demand while staying compliant.
Impact on Consumers
For consumers, the most noticeable impact of excise tax is the increase in product prices. Items such as cigarettes, soft drinks, and energy beverages have become significantly more expensive since the introduction of the tax.
While the price rise may seem burdensome, it has contributed positively to public health goals. Many people have reduced their consumption of sugary drinks and tobacco, leading to healthier lifestyle choices. The additional government revenue is also used to fund health awareness programs and community projects.
Benefits of Excise Tax in the UAE
Healthier Population:
The tax discourages the consumption of harmful products, helping to combat obesity, diabetes, and other lifestyle diseases.
Increased Government Revenue:
The revenue collected supports healthcare initiatives, education, and sustainable development projects.
Environmental Impact:
The reduction in consumption of certain products helps minimize waste and pollution.
Economic Diversification:
Excise tax contributes to the UAE’s broader vision of diversifying income sources beyond oil.
Future of Excise Tax in the UAE
The excise tax system is expected to evolve as the government continues to align with global standards and sustainability goals. Future expansions could include taxes on more environmentally harmful products, such as plastic items or high-emission vehicles.
The FTA continues to refine compliance systems, improve transparency, and educate businesses on their obligations. As consumer awareness grows, the excise tax will play an even stronger role in shaping a healthier and more sustainable UAE.
Conclusion
In summary, excise tax in the UAE is a strategic measure aimed at protecting public health, reducing harmful consumption, and strengthening the national economy. By targeting products such as tobacco, sugary drinks, and energy beverages, the government encourages better lifestyle choices while generating vital revenue for national development.
Both businesses and consumers play a key role in ensuring the success of this initiative. With growing awareness and compliance, the excise tax continues to contribute positively to the UAE’s vision of a healthier, sustainable, and prosperous future.
|
