Registered businesses must file excise tax returns before 15th November in UAE

The Federal Tax Authority (FTA) has called upon businesses registered for the excise tax to file their October returns before the deadline on November 15, 2017, in order to avoid the penalties.

The authority has stressed the necessity of filing returns regularly before the 15th of every month for the previous tax period. All businesses registered for Excise Tax must pay the due tax on excisable goods (50 percent on carbonated drinks, 100 percent on tobacco products and energy drinks) to avoid penalties stipulated in Cabinet Decision No. (40) of 2017 on Administrative Penalties for Violations of the Tax Laws in the UAE.

"Since the beginning of November, businesses registered for excise tax have been consistently complying with their requirements and deadlines, filing their tax returns on time. We urge those who haven't done so yet to file their returns before the deadline of November 15, 2017, and settle the payable tax stated in the submitted excise tax return, in order to fulfil their obligations according to the tax procedures in the UAE," Khalid Al Bustani, director-general of the Federal Tax Authority, said.

The Cabinet Decision No. (40) of 2017 on Administrative Penalties for Violations of the Tax Laws in the UAE applies to all the listed violations in the Federal Law No. (7) of 2017 on Tax Procedures and Federal Decree-Law No. (7) of 2017 on excise tax. According to this, the failure of the registrant to submit the tax return within the timeframe specified in the Tax Law will subject them to an automatic Dh1,000 penalty in the first time and Dh2,000 in case of repetition within 24 months.

The Cabinet Decision also states that if a taxable person fails to settle the payable tax stated on the submitted tax return or tax assessment he/she was notified of, within the timeframe specified in the tax law, he will be obligated to pay a late payment penalty of 2 per cent of the unpaid tax - due immediately once the payment of payable tax is late; 4 per cent, due on the seventh day following the deadline for payment; and a 1 per cent daily penalty will be charged on any amount that is still unpaid one calendar month following the deadline for payment, with the upper ceiling being 300 per cent.

Businesses are also required to ensure the accuracy of the data being submitted, as the submittal of an incorrect tax return by the registrant can incur a fixed penalty of Dh3,000 plus a percentage-based penalty of up to 50 percent of the amount unpaid.

Online registration for excise tax starts on September 17

The Federal Tax Authority, FTA, has announced that it will open online registration for excise tax for businesses on September 17, providing an integrated system to serve the business sectors as per the highest international standards.This marks a major step underlining the UAE’s leading position in the application of a world-class tax system.

The 24/7 registration will be via FTA's website, which provides businesses and consumers with a wealth of information on the upcoming introduction of an excise tax, due on 1st October.

The FTA website, www.tax.gov.ae, includes information about the Authority itself, as well as an introduction to the different types of indirect taxes in the country, the legislation regulating them, and the objectives and benefits of the UAE economy.

The UAE last month published the law on excise taxes relating to tobacco as well as energy and fizzy drinks, ahead of the introduction of the new tariffs.

The law will impose an excise tariff of 100 per cent on tobacco and energy drinks and 50 per cent on sugary drinks. The FTA estimates that around 250 companies in the UAE will be impacted by the excise tax.

The UAE is expected to be the second country in the Arabian Gulf to introduce excise taxes after Saudi Arabia began implementing the tax at the same rates in June this year.

Legislation relating to the introduction of VAT at 5 per cent in the UAE has recently been published. Implementing regulations, which will provide more detail on taxable goods, are due before the end of the year.

The introduction of VAT and excise taxes are expected to boost the inflation rate by a one-off 1.4 per cent, Khalid Al Bustani, the FTA’s director general, said last month.

The International Monetary Fund meanwhile expects the introduction of VAT across the GCC to boost the region's GDP by about 1.5 per cent.

UAE Excise Tax Law effective October 1st 2017

The President, His Highness Sheikh Khalifa bin Zayed Al Nahyan, has issued a federal decree-law on excise tax, which will be imposed on selected products.

As per Federal Decree-Law No. 07 of 2017, excise tax rates that shall be imposed on the excise goods, which, along with the method of calculating the excise price, are subject to a decision by the council of ministers, upon the recommendation of the minister of finance, provided that the tax rates do not exceed 200 per cent of the excise price.

At its 37th meeting, in December 2016, the Supreme Council of the Gulf Cooperation Council, GCC, issued a resolution on excise goods list, which contains tobacco products, energy drinks and certain soft drinks.

"As President, His Highness Sheikh Khalifa issues Federal Decree-Law No. 07 of 2017 on excise tax, the UAE takes a great leap forward," Sheikh Hamdan bin Rashid Al Maktoum, Deputy Ruler of Dubai and UAE Minister of Finance, said.

"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."

"The project diversifies the government's revenue streams and boosts its resources, which, in turn, will strengthen the economy and ensure its sustainability," Sheikh Hamdan bin Rashid added. "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."

The new legislation requires excise tax to be imposed on certain activities around specific "excise goods", activities such as the production or importation of excise goods in to the UAE, as well as the stockpiling of excise goods in the UAE, where these activities occur in the course of doing business.

As per initial estimates, the tax is forecast to generate up to around AED7 billion in annual revenues for the Federal Budget.

The Decree-Law also determines the specific dates for accounting for the tax, namely: the date on which the Excise Goods are imported, the date on which the Excise Goods were acquired by the Stockholder, if after the Decree-Law came into effect, or the date it came into effect otherwise, and in all other cases the date on which the Excise Goods were released for consumption. The release for consumption shall further be clarified in the Executive Regulation of the Decree-Law

The due tax is, moreover, the responsibility of the person who conducts any of these activities, or, if said person fails to meet their obligations, a person involved in any of the activities. In the event that excise goods are released from a designated zone (and where payable tax has not been paid previously), the onus is on the warehouse keeper to pay the tax.