The Government in UAE is consistently showing leadership to slow down unhealthy products from being manufactured to be consumed by humans. This led to doubling the number of items subject to excise tax. Contact tax advisory services if your company requires assistance calculating taxes and benefits.

A Quick Overview of Excise Tax

According to the Federal Tax Authority (FTA), the application of Excise Tax was a tremendous success in all facets, in terms of the implementation that was developed in line with international best practices or in terms of encouraging collaboration from sectors of taxable companies. Other metrics have also shown positive results, suggesting that the Excise Tax rollout has met its primary objectives.

The review was included in a press release issued by the authority to commemorate the five-year annual celebration of the execution of the Excise Tax, which took effect in the UAE on 1 October 2017 and was applied to carbonated drinks at a 50% rate, and tobacco products and energy beverages at 100%.

According to cabinet decision No. 52 of 2019 on excise goods and methods of estimating the excise cost, the excise goods' scope was expanded to sweetened drinks subjected to a 50% rate, and electronic smoking devices, as well as the liquids used at a 100% rate, as of 1 December 2019.

According to the FTA, the maximum count of taxpayers increased steadily from 309 to 430 between 2017 to 2018, representing a 39.16 percent increase. By the end of 2019, the total had jumped to 60.47 percent to 690 payers, then by 45.36 percent to 1,003 payers by the close of 2020, and by another 22.33 percent to 1,227 payers by 2021.

The overall number of registrants increased by 19.72 percent during the first 9 months of the current year, reaching 1,469 at the finish of September 2022. Overall, this is a total increase of 375.41% from the finish of 2017 to September 2022. Overall, this is a total increase of 375.41% from the finish of 2017 to September 2022.

Similarly, the authority observed that the total quantity of goods recorded as excise goods climbed from 3,078 at the close of 2017 to 5,275 at the close of 2018, representing a 71.38% rise. After the decision to improve the excise goods' scope went into force, the number grew to 11,469, representing a remarkable rate of growth of 117.35 percent, by the close of 2019. It increased by 71.76 percent to 19,692 items by the close of 2020, 37.3% to 27,037 items by the close of 2021, and 14.04 percent in the first 9 months of 2022, hitting 30,834 items in September.

The figures show an astounding cumulative rate of growth of 901.75% between 2017 and 2022. Per the policy, the list of Excise Goods is reviewed and changed regularly to evaluate FTA-approved pricing for excise items.

Implementation of Excise Tax with the Assistance of Tax Advisory Services

According to Khalid Ali Al Bustani, director-general of the FTA, the Authority has made frequent progress on performance and indicators over the last few years, implementing initiatives in all sectors of its work in line with its aims. The FTA stepped up its efforts to administer and enforce federal taxes by implementing smooth, transparent, and precise methods based on modern integrated computer systems.

He emphasized taxable persons' growing cooperation and responsiveness with the Federal Tax Authority, as well as their commitment to filing their tax returns and paying their due taxes on time, highlighting the FTA's constant communication lines with businesses to resolve any obstacles that may impact their company growth or impede their tax compliance.

"Over the past 5 years of instituting Excise Tax in the UAE, the FTA made a series of significant achievements and documented impressive results, which enhanced the tremendous measures taken to implement our prudent leadership's directives to make the Emirates one of the best nations in the world across all segments, and maintaining the UAE's competitive position," Al Bustani added. “The implementation of Excise Tax in the fourth quarter of 2017 and its growth in 2019 are part of the government's objectives to protect public health from changing harmful consumption behavior in an effort to reduce disease-related damage," he stated.

Expanding the Scope of Excise Goods with Tax Advisory Services

According to Al Bustani, the decision to broaden the excise goods ' scope meant that it would include electronic smoking tools and the liquids utilized within, in addition to tobacco products, energy beverages, and carbonated and sweetened drinks. "The decision followed wise leadership directives to accelerate the pace of progress toward a safe society by lowering the use of harmful goods, avoiding the damage they inflict on the community, and combating diseases caused by harmful consumption patterns, in addition to establishing the resources required to help the growth of government services to members of the community."

Also Read : All About the Tax System in the UAE

"Significant positive effects have been registered nearly 3 years after executing the decision to increase the excise goods' scope," he stated. "For instance, indicators suggest that several firms manufacturing drinks have established their production methods in reaction to the decision, resulting in an increase in the manufacturing and sale of beverages (sugar-free), which helps boost consumption habits in the community and eventually improve public health by lowering rates of tooth decay, diabetes, obesity, and other illnesses caused by high sugar consumption."

The Takeaway

"Businesses were supportive in meeting standards for incorporating Excise Tax, which was facilitated by the ease with which the Federal Tax Authority outlined steps for taxpayers to pursue when filing and paying their tax returns through the online portal on the FTA's official website, which is, www.tax.gov.ae, that was developed in accordance with best practises to enhance tax awareness, provide instructions, and create a well-established environment to encourage the business industries to comply with the tax needs. Contact Fortius Consulting Services, one of the best business consulting and CFO services in UAE, if you need professional guidance with your tax filing.