Federal Tax Authority: 782 Businesses Registered For Excise Tax, Higher Compliance With Tax Returns Requirements Reported

Curbing harmful consumption patterns and enhancing living standards are the leading objectives behind the Cabinet Decision to expand the scope of Excise Tax, asserted His Excellency Khalid Ali Al Bustani, Director General of the Federal Tax Authority (FTA), at a media workshop organised by the FTA on Tuesday, October 29, 2019, to introduce the purposes of the Decision, as well as the procedures for registering in the FTA’s system.

H.E. Al Bustani explained that the expansion of Excise Tax answers directives from the UAE’s wise leadership to enhance the country’s competitiveness and expedite plans to build a safe, healthy community, by curbing the consumption of harmful products, diversifying sources of income, and expanding the government’s offering of public services.

“The Decision is in line with the government’s efforts to discourage products that harm public health, avoid the damage they inflict and the costs associated with the treatment of the diseases they cause, and change harmful consumption patterns,” he said.

FTA officials attended the workshop, giving a detailed presentation about Cabinet Decision No. (52) of 2019 on Excise Goods, Excise Tax Rates, and the Methods of Calculating the Excise price. The Decision goes into effect on December 1, 2019, expanding the list of goods subject to Excise Tax to include sweetened drinks, electronic smoking devices and tools, and the liquids used in these devices, which will be added to the items that have carried the tax since it first went into effect on October 1, 2017, namely, tobacco and tobacco products, energy drinks, and carbonated beverages.

H.E. Al Bustani went on to cite the products that would be exempt from the new Decision, which include ready-to-drink beverages containing at least 75% milk or milk substitutes; baby formula, follow-up formula, or baby food; beverages consumed for special dietary needs; and beverages consumed for medical uses. The Decision includes specific standards for classifying products in one of these categories, and considering them exempt from Excise Tax.

“Surveys have shown that implementing Excise Tax at a rate of 50% on carbonated drinks and 100% on tobacco products and energy drinks has been a great success,” H.E. added. “This success has been made evident by the high rates of compliance among businesses, facilitated by our simple and transparent approach, and our state-of-the-art electronic systems. We have also witnessed many noticeable positive outcomes, indicating that the objectives for which Excise Tax was introduced have been largely met.”

The FTA Director General hoped to see more positive results from expanding the scope of Excise Tax to implement a 50% tax on sweetened drinks and a 100% tax on electronic smoking devices and liquids. The FTA has thoroughly completed its preparations to collaborate with all relevant government and private entities to ensure utmost compliance, he asserted.

H.E. Khalid Al Bustani drew attention to the significant improvement in compliance with Excise Tax Returns requirements two years after the Tax went into effect, revealing that the number of businesses registered with the FTA for Excise Tax has risen to 782. H.E. urged businesses that are subject to Cabinet Decision No. (52) of 2019 to register in the FTA’s electronic system well ahead of December 1, 2019, noting that early registration helps businesses avoid violations and consequent obstacles they may face when importing Excise Goods.

Businesses subject to Excise Tax who have yet to register as such with the Federal Tax Authority must do so first, before going on to register all the Excise Goods they supply that have been mentioned in the Cabinet Decision. The FTA determines the procedures required to verify whether or not a certain product should truly be classified as an Excise Good; the Authority reserves the right to ask Taxable Persons to provide documents or laboratory reports detailing the ingredients of any products where classification proves difficult.

“The Federal Tax Authority has exerted tremendous efforts to facilitate early registration, well ahead of the date the Decision goes into effect,” H.E. Al Bustani said. “This allows sufficient time for concerned businesses to register through the FTA website. In August 2019 – nearly four months ahead of enforcing the Decision – the Authority began receiving registration applications from producers, importers, and stockpilers of sweetened drinks, electronic smoking devices and tools, and the liquids used in these devices, in addition to requests for registering these products.”

“Since the Cabinet Decision was issued in August 2019, the FTA rolled out a comprehensive plan to implement the Decision,” H.E. explained. “The registration system was upgraded and new procedures for registering Excise Goods were introduced. Meanwhile, FTA experts created a series of manuals and guidelines, publishing them on the Authority’s website to clarify the procedures and standards for implementing Excise Tax on sweetened drinks, and electronic smoking devices and liquids, as well as the registration process for taxable businesses and the Excise Goods they supply.”

“In August, the Authority began implementing a comprehensive awareness campaign, holding workshops for all stakeholders involved in implementing the Cabinet Decision, in collaboration with the competent authorities around the country,” H.E. Al Bustani noted, adding that the sessions targeted businesses subject to Excise Tax as per the new Decision, regardless of whether or not they have registered as such with the Authority.

The FTA experts introduced attendees at the workshop to their obligations under the new Cabinet Decision No. (52) of 2019, which identifies electronic smoking devices as any e-cigarette devices, tools, and the like, while electronic smoking liquids include all liquids used in electronic smoking devices, whether or not they contain nicotine or tobacco.

The Decision considers Sweetened drinks to be any beverage where any type of sugar or sweeteners are added, whether it is supplied ready-to-consume as a drink, or in the form of concentrates, powders, gels, or solutions that can be converted into sweetened drinks. The new regulation defines sugar as any type of sugar determined under Standard 148 of the GCC Standardisation Organisation as ‘sugar’, while sweeteners include any type of sweeteners determined under Standard 995 of the GCC Standardisation Organisation as ‘sweeteners authorised for use in food products’.