UAE: Excise tax on tobacco, energy and carbonated drinks

UAE: Excise tax on tobacco, energy/carbonated drinks

Under new provisions in the United Arab Emirates, an excise tax is to be imposed on goods considered harmful to human health and the environment, and on luxury goods. While each Gulf Cooperative Council (GCC) country can individually decide the tax rates and which goods are taxable, the rate of excise tax has been capped at 100% of the value of the goods.

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A draft excise tax law was approved by the Federal National Council in March 2017 with the final excise tax law expected to be published before 30 June 2017. Proposed excise tax rates in the UAE include:

  • 100% for tobacco and tobacco products
  • 100% for energy drinks
  • 50% for carbonated drinks

When goods are imported into the UAE, the importer is responsible for paying the correct amount of excise tax to the tax authority before removing the goods from the designated storage area. For locally produced goods, the producer must pay the excise tax before removing the goods from the place of production. Tax procedure measures in the UAE for purposes of regulating all taxes—including value added tax (VAT) and excise taxes—have been approved and will be publicly available. 

KPMG observation

Excise taxes could affect customer prices on the three categories of goods. Businesses trading in these goods need to consider a review of their pricing strategies, determine the full impact of the excise tax, and be certain they understand what needs to be done to be fully compliant.

 

Read a May 2017 report prepared by the KPMG member firm in the UAE

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