UAE: New tax on sweetened drinks and tobacco

published on 24 March 2020 | Reading time approx.  2 minutes

In October 2017, the United Arab Emirates (UAE) had firstly introduced the so-called "Excise Tax”, which is a type of taxation levied on the consumption of individual goods or services. This tax aims on the prevention of chronic diseases caused by tobacco and sugar consumption as well as on the promotion of public health overall.

The main consequence of an excise tax is an increase of retail prices. Companies that manufacture, import, store or otherwise are responsible for the storage of products covered by the excise tax in the UAE, are required to register with the Federal Tax Authority (FTA), and to pay excise duty. As a result, prices for the products affected increase, which in the end is generally to be compensated by the end consumer.
 
The excise tax previously comprised beverages to which sugar or other sweeteners were added (so-called beverages; taxation at 50 per cent), energy drinks (taxation at 100 per cent ) and tobacco products (taxation at 100 per cent).
 
Since January 1, 2020 die excise tax does also apply to other products (Cabinet Decision No. 52 of 2019). According to the Cabinet and the tax authorities, the excise tax does affect the following:

• Products to which sugar or sweeteners have been added, whether it be a beverage, a powder, a concentrate, an extract or other substances or liquids from which a beverage can be made (50 per cent taxation),
• E-cigarettes, e-shishas and all similar electronic devices and corresponding liquids, as well as their accessories, regardless of whether they contain nicotine or tobacco (100 per cent taxation).
   

The UAE Government, on the other hand, excludes some beverages from taxation, although they would in principle be subject to excise duty. Such exceptions are the following products:

• Ready-to-drink beverages containing at least 75 per cent milk or milk substitutes,
• Infant food,
• Drinks which are necessary for a special diet,
• Drinks which are required for medical purposes and administered under medical supervision.

Companies that trade, import or store affected products will be required to monitor further developments regarding excise duty and to register their products at the request of the tax authorities.