UAE to impose excise tax on soft drinks starting in 2017

Tax on tobacco is expected to bring in $545 million (AED2 billion) in annual revenues
By Parag Deulgaonkar
Thu 11 May 2017 09:33 AM

The UAE is planning to start imposing excise tax on fizzy drinks, tobacco products and energy drinks from fourth quarter 2017, according to Ministry of Finance (MoF) officials.

The information on the expected tax date was shared by government officials during their first excise tax briefing in Dubai on Wednesday.

During the briefing, officials disclosed that the tax legislation will be issued in the second quarter, with companies likely to be allowed to register online from the third quarter.

As per the unified treaties approved in June 2016, the Gulf countries have agreed to impose excise tax on the importation and production of soft drinks, energy drinks and tobacco products.

“In the UAE, it is expected that excise tax will be implemented in the fourth quarter, with the excise legislation published in the second quarter,” Adrienne D’Rose, senior manager, Deloitte, told Arabian Business, who was present at the briefing.

The rates are set at 50 percent for soft drinks and 100 percent for energy drinks and tobacco products, which are likely to be based primarily on the product’s retail sales price, she said.

Tax will be payable monthly by registered businesses, on the 15th day of the following month, D’Rose said, adding officials warned companies not to resort to “stockpiling”.

Importers, manufacturers, and third parties in the UAE will be allowed to register premises as tax warehouses or designated zones, and store products within these areas tax suspended.

“Refunds may be available, for example on the export of tax paid product, or where excisable goods have been used in the manufacture of excisable goods. The general rule being excise should be incurred once in the supply chain, and only in the jurisdiction of consumption,” she said.

In a report, issued last year, the US-UAE Business Council said Gulf countries have turned to excise taxes because they double as a tool to achieve social change.

All GCC states have high levels of smoking and residents suffer from high rates of obesity, diabetes and associated illnesses, it said, adding excise taxes on tobacco and sugary beverages will incentivise citizens to adopt healthier lifestyles as well as procure revenue for state coffers.

Speaking at the Federal National Council in March, Minister of State for Financial Affairs Obaid Al Tayer said tax on tobacco is expected to bring in $545 million (AED2 billion) in annual revenues, but did not give any revenue estate from soft drinks segment where he expects drop in consumption.

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