UAE e-cigarette and sweetened drink taxes in force from 1 December

Out-Law News | 14 Oct 2019 | 9:46 am | 1 min. read

Electronic cigarettes and related products and sweetened drinks will become subject to UAE excise tax from 1 December 2019, the Federal Tax Authority (FTA) has confirmed.

The UAE announced its intention to extend the excise tax regime to these products earlier this year. The FTA has now published ministerial decisions implementing the new rules, including the effective tax rates and calculation methods.

Excise tax was introduced in late 2017 with the intention of reducing consumption of goods "harmful to human health or the environment". It originally applied to tobacco products, carbonated drinks and energy drinks.

A 100% excise tax will be imposed on electronic smoking devices, liquids and tools whether or not they contain nicotine or tobacco. A 50% excise tax will be imposed on drinks with added sugar or sweeteners, as well as "concentrates, powers, gels or extracts that can be transformed" into carbonated, sweetened or energy drinks.

Excise tax is payable by importers and producers of goods as well as, in certain circumstances, those who stockpile goods.

The FTA has also published a ministerial decision implementing new minimum excise tax rates on tobacco products, which will also come into effect from 1 December 2019. From this date, a minimum excise tax of AED 0.40 (US $0.11) must be applied per individual cigarette; and a minimum excise tax of AED 0.10 (US $0.027) must be applied per gram of water pipe tobacco, ready-to-use tobacco or similar product.

Tax expert Joanne Clarke of Pinsent Masons, the law firm behind Out-Law, said: "Businesses dealing in any products that may fall within the scope of excise tax need to assess the scope definitions critically, understand the correct rate and ensure compliance with the new administrative requirements. It appears there will be no tolerance of non-compliance, and the penalty regime will be applied liberally".