tax generic
Photo for illustrative purposes only Image Credit: Pixabay

Dubai: Federal Tax Authority (FTA) on Tuesday urged all manufacturers and importers of items listed in the expanded list of excise duties to register with the Authority for tax compliance ahead of the date of implementation of new taxes.

The UAE introduced the excise tax October 2017 on goods, which are deemed harmful to public health or to the environment in order to reduce consumption and increase government revenues allocated to cover the costs of public services.

According to the previously enacted law, the excise tax rate ranged from 50 to 100 per cent on tobacco and its products, energy drinks and soft drinks.

Earlier this year the government added new items to the list of goods subject to excise such as electronic smoking devices and tools at 100 per cent and sweetened beverages at the rate of 50 per cent excise duties.

The new excise duties will be in addition to the customs duties. The retail prices of these items will be subject to 5 per cent VAT in addition to customs and excise duties.

“We want to make the implementation of excise tax with the newly expanded list a very efficient exercise for businesses and the tax authority. Thus, we urge businesses, both manufacturers and importers of taxable items to register with the tax authority to avoid fines,” said Khalid Ali Al Bustani, FTA’s director general.

FTA said excise duties on the expanded list will be effective as of December 1, 2019, in accordance with the Cabinet and Ministry of Finance decisions and full compliance on registration is mandatory.

The FTA called on importers, producers and stockpilers of electronic smoking devices, liquids used in such devices and sweetened drinks to register for excise tax system as soon as possible.

The authority said that registering for the tax will avoid all stakeholders any fines or obstacles that may arise from late or failed registration.

Minimum price

A minimum price Dh0.40 must be applied per individual cigarette; and a minimum price of Dh0.10 must be applied on water pipe tobacco, ready-to-use tobacco or similar product, according to a decision issued the Ministry of Finance. “We have noticed the use of cheap substitutes that could be more harmful to the health of the users of tobacco products and that is the reason a minimum unit price is set for such products,” said Al Bustani.

Compliance and penalties

FTA’s data base is linked directly to the customs department and the taxable items that falls under excise list have item codes that can be easily identified.

Currently there are 9,000 items that comes under excise list. Following the recent expansion of the list an additional 900 items have been added to the list and the FTA expects up to 4,000 new additions to the list.

Following the implementation of excise duties on the newly added items, importers will not be able clear any of the taxable items through customs if they are not registered with the FTA.

Currently there are 782 companies that are registered with FTA, the deadline for registration for companies is November 30, 2019, and January 15, 2020, is the deadline for registration of stocks.

While the failure to register for excise duties within the deadline will invite a penalty of Dh20,000 and failure to register excess existing stocks of taxable items as of December 1, 2019, ahead of January 15, 2020 could invite a penalty of Dh20,000.

The FTA is in the process of introducing digital tagging for all goods that comes under the purview of excise duties to avoid smuggling, the tax authority said it will also introduce a mobile application that will enable the customers to check the authenticity of the products they consume through a bar code reader.

New excise list and tax rates

  • Sweetened drinks to be taxed at 50 per cent.
  • Electronic smoking devices and tools taxed at 100 per cent.
  • Liquids used in electronic smoking devices taxed at 100 per cent.