Everything you need to know about the new tax law

A Federal Decree-Law has been revealed on excise tax by HH Sheikh Khalifa bin Zayed Al Nahyan.

shutterstock_354037463The federal law of excise tax is here but what does it all mean, how will it affect you and what else other taxes are expected to follow?

What is excise tax? 

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The tax, to be introduced in the UAE in the coming months, will affect a number of popular consumer products that are deemed harmful to public health.

As a form of indirect taxation, the tax will be paid by the retailer or producer, which could affect the prices of a number of commonly purchased items as merchants look to levy the increase in cost.

The plans will introduce rates of 100 percent tax on tobacco and energy drinks and a 50 percent tax on fizzy drinks.

The introduction of the tax is part of the government’s plans to improve and modernise the economy and improve public health.

“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,” HH Sheikh Hamdan bin Rashid Al Maktoum, the UAE minister of finance, said.

“The Excise Tax, in particular, will help us build a healthier and safer society. This tax is set to discourage the consumption of products that negatively impact the environment and, more importantly, people’s health, while the revenues it generates will go towards supporting advanced services for all members of society.”

What does the tax involve?

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The tax is placed directly on the importing or production of products determined to be ‘excise goods’ – this includes soft drinks, tobacco and energy drinks.

Retailers and importers will be liable for paying tax and must operate in accordance with the procedures stated in the Executive Regulation of the Decree-Law.

The new law outlines a set of violations that will entitle penalties to be issued to retailers or producers for tax evasion.

Taxable persons or entities will be required to have a record of all produced, imported, exported or stockpiled excise goods, and records of stock levels, including details of items lost or destroyed, among other measures.

What’s next? 

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The UAE is likely to be the second country in the region to introduce excise taxes after Saudi Arabia, where tax was introduced in June.

A law on value added tax (VAT) is expected to be announced soon in the UAE, as VAT is slated to be introduced from January 2018 at a rate of five percent.

For more information on The Federal Decree-Law, visit the Ministry of Finance website here.

 

 

 

 

 

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