The United Arab Emirates has introduced an excise tax of 100 percent on tobacco products and energy drinks and a 50 percent tax on fizzy drinks (except for carbonated water) today.
The tax has been introduced for two reasons: to dissuade people from buying unhealthy products and as a method for broadening the country's tax base as part of a broader economic diversification, which will also see a 5 percent rate of VAT imposed on many products from January next year.
Full details of the excise tax were only revealed last week when the Federal Tax Authority revealed that the 250-or-so companies involved in businesses that needed to register for the tax had been expected to do so by the end of last week. Tax payments are expected to be made by them 15 days after the end of each month.
Speaking ahead of the launch at a press conference last Wednesday, the director-general of the Federal Tax Authority (FTA), Khalid Ali Al Bustani said: “Implementing Excise Tax in accordance with international best practices is the culmination of an extensive process, one where the FTA worked with some of the world’s leading companies to develop a tax system that suits the UAE."
He added that the FTA had led a comprehensive education campaign, which included workshops with the businesses that are responsible for collecting and paying the levy.
The introduction of excise tax on VAT in the UAE follows on from its introduction in Saudi Arabia in June this year. Reports in the kingdom suggest that the tax has been effective in curbing sales of soft drinks and energy drinks, but added that smokers have proved to be more resolute, with many switching to cheaper brands.
Further reading:
- UAE smokers stock up on cigarettes before excise tax kicks in
- UAE sets starting date for excise tax registration
- UAE excise tax to be implemented from October
- UAE authority launches website to offer clarity on excise tax and VAT rollout
- Excise tax to be paid in e-dirham only
© Zawya 2017
