21 August 2017
A new excise tax on tobacco, fizzy and energy drinks will be implemented in the United Arab Emirates starting from October, according to the new presidential decree approving the tax, which was published on the Ministry of Finance’s website on Monday.
The director-general of the UAE’s Federal Tax Authority, Khalid Al Bustani, announced in a press conference last week that the country will start implementing an excise tax at a rate of 100 percent on tobacco and energy drinks and 50 percent on fizzy drinks
(excluding carbonated water) starting from the fourth quarter of the year.
He said the excise tax law will be signed by the government in the third quarter, with regulations coming into force in the fourth quarter.
The new tax is part of an economic plan adopted by the UAE and other GCC countries to diversify revenue sources following a decline in oil prices which started in 2014. Saudi Arabia began implementing a similar excise tax in June. Both the kingdom and the UAE will introduce a 5 percent value-added tax next January, with the other four GCC members to follow in due course.
“We are making remarkable progress in our plans to establish a sound legislative infrastructure to support the UAE’s tax system and make sure it meets and exceeds international best practices,” Sheikh Hamdan bin Rashid Al Maktoum, the deputy ruler of Dubai, finance minister and chairman of the Federal Tax Authority, said in a press release issued by the ministry.
“The project diversifies the government’s revenue streams and boosts its resources, which, in turn, will strengthen the economy and ensure its sustainability,” he added.
The excise tax decree document shows the excise tax law was signed last week by the president of the UAE, Sheikh Khalifa bin Zayed Al Nahyan.
“This decree by law will be published in the Official Gazette and get implemented starting October 1, 2017,” it said. It added that a regulatory framework for the law will be issued by the cabinet.
The excise tax law consists of 30 articles, detailing the tax’s general rules and procedures. One of these, Article 16, states that some products liable for excise that are used in the manufacturing process for other goods also subject to excise taxes could gain special discounts. The decree said the regulatory framework will include more details on tax reductions.
It also said that products liable for duty that are exported could be exempted from duty, or be liable for a discounted rate, although the regulatory framework will spell out exactly how excise on exported products will be treated.
© Zawya 2017