UAE MoF releases the Executive Regulation of Federal Decree-Law on Excise Tax
The UAE Ministry of Finance (MoF) has published Cabinet Decision No. (37) of 2017 on the Executive Regulation of the Federal Decree-Law No. (7) of 2017 on Excise Tax.
The Ministry has also released Cabinet Decision No. (38) of 2017 on Excise Goods, Excise Tax Rates and the Method of Calculating the Excise Price, the latter of which will add 50 per cent to the price of carbonated beverages and 100 per cent to that of tobacco products and energy drinks.
The announcement comes after both decisions were ratified by the Council of Ministers in its meeting on 13 September 2017, which was chaired by HH Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE, Ruler of Dubai.
“The Cabinet decisions, which detail the Executive Regulations of the Excise Tax law and specify the taxable goods, tax rates and the method of calculating the tax, mark the culmination of our preparation phase. As of 1 October 2017, we will begin implementing the first phase of the tax system, by applying Excise Tax–at a rate of 50 per cent to 100 per cent–on designated products that are deemed harmful to people’s health,” said HE Obaid bin Humaid Al Tayer, Minister of State for Financial Affairs.
The adequate legislative and administrative environment for launching the tax system has been set up. The laws and regulations that have been issued seek to regulate the relations between all stakeholders, allowing them to work together and curb the consumption of these harmful goods, which helps establish a healthier environment in the UAE, added Al Tayer.
Cabinet Decision No. (37) of 2017 on the Executive Regulation of the Federal Decree-Law No. (7) of 2017 identifies the person liable to pay tax where the person who conducted the activity (importing, producing or stockpiling of excise goods) has not settled the tax, as a person in the supply chain, an investor with a financial interest in the supply chain, or the owner of the excise goods. In certain cases (detailed within the law), the onus may be on the warehouse keeper to pay the tax, where excise goods have been released from a designated zone and the person responsible for the tax has failed to account for it to the FTA.
A stockpiler would not be liable for the tax where he obtains excise goods before the date the law comes into force if these are ready for release for consumption in the state where the tax has not been paid and not waived or deferred, if such excise goods are not excess excise goods.
The legislation goes on to clarify the controls and conditions required for applying for tax registration, such as the right of the FTA to impose on a person a financial guarantee for tax registration purposes. if a taxable person fails to notify the Authority of their obligation to register for tax, the law allows the FTA to register them with effect from the date the Decree-Law comes into force.
A tax period for excise tax shall be the calendar month, where the taxable person is expected to submit the tax return no later than the 15th day of the month following the tax period.
The Decree-Law mandates that declarations be filed regularly and that tax records be kept in accordance to a set of requirements, such as retaining price lists of excise goods produced, imported or sold and abiding by specific timeframes, limitations and conditions.
Cabinet Decision No. (38) of 2017 on Excise Goods, Excise Tax Rates and the Method of Calculating the Excise Price, goes into the specifics of the tax system, revealing the agreed-upon tax rates (50 per cent on carbonated drinks and 100 per cent on tobacco products and energy drinks) and defining excise price as the higher of the following two: the price published by the FTA for the excise good in a standard price list and the designated retail sales price for the excise good, minus the tax included therein. It then identifies the designated retail sales price as the higher of the following two: the recommended selling price of the excise good identified, declared and affixed by the importer or producer, and the average retail selling price in the market.
The full text of Cabinet Decision No. (37) of 2017 on the Executive Regulation of the Federal Decree-Law No. (7) of 2017 on Excise Tax, and Cabinet Decision No. (38) of 2017 on Excise Goods, Excise Tax Rates and the Method of Calculating the Excise Price are available on the official websites of the Ministry of Finance www.mof.gov.ae and the Federal Tax Authority www.tax.gov.ae