Intangible Assets Identification and Valuation

The UAE Federal Tax Authority (FTA) released Cabinet Decision No.52 of 2019 on Excise Goods, Excise Tax Rates and the Methods of Calculating the Excise Price on 4 September 2019. The new Cabinet Decision will replace the former Cabinet Decision No.38 of 2017 which was applicable only to tobacco and tobacco products, energy drinks and carbonated drinks. The new decision is agreed upon to expand the reach of the excise tax to include the following products:

  • Electrically heated cigarettes
  • Electronic smoking devices and tolls (with or without tobacco or nicotine)
  • Liquids used in electronic smoking devices and tools (with or without tobacco or nicotine)
  • Sweetened drinks

The Cabinet Decision will be effective on 1 December 2019.

Excise goods details & Excise tax rates

Tax on the electrically heated cigarettes will be levied at the rate of 100 percent. The same will be applicable to electronic smoking devices and tools (with or without nicotine/tobacco). Liquids used in electronic smoking devices and tools will also be taxed at the rate of 100 per cent. Whereas sweetened drinks will be taxed at a rate of 50 per cent.

Any product with added sugar (as defined under Standard 148 of the GSO and related standards) or other sweeteners (as defined under Standard 995 of the GSO) will be treated as a sweetened drink. Any product in the form of liquid, powder, gel, extracts or any other form that can be converted into a sweetened drink will attract the excise tax.

Besides, the excise tax will not be applicable to beverages containing a minimum of 75% milk or milk substitutes, baby formula, and baby food. Also, beverages consumed for special dietary requirements (as defined under Standard 654 of the GSO and related standards) and those consumed for a medical purpose (as defined under Standard 1366 of the GSO and related standards) will not attract excise tax.

Who must prepare?

  • Manufacturers or producers of goods supplied for consumption in the UAE
  • Businesses that import excise goods into the UAE
  • Any business that keeps a bulk amount of excise goods in stock in their premises in the UAE.
  • Warehouse keepers responsible for supervising an excise warehouse or a designated zone.

Objective of the new Cabinet decision

Cabinet Decision No.52 of 2019 will come into effect with the aim to lessen the consumption of unhealthy products. It will support the reduction of consumption of products that are harmful to both people and the environment. As a result, this will change consumer purchase behaviour and increase awareness.

As per the Cabinet General Secretariat, the decision is to reinforce the UAE government’s efforts to improve public health and prevent chronic diseases that directly associate with sugar and tobacco consumption. In addition, the implementation will require the manufacturers to clearly label the sugar content. This will enable consumers to make healthy purchase decisions.

How can PKF UAE assist with the implementation?

The extension of the scope of excise tax on the listed products is likely to impact cash flows, profitability, invoicing, documentation, legal compliances, record keeping, IT systems, contract terms and product demand. Hence, it would be essential for businesses to perform the following as part of the implementation strategy:

  • Ascertainment of taxability of products
  • Prepare for representation to FTA for any clarification (if applicable)
  • Evaluation of the domains and extent of the impact
  • Identification of changes necessary to packaging, labelling and marketing approach
  • Updating IT systems to comply with law
  • Obtaining excise tax registration
  • File returns
  • Prepare to claim refunds (if applicable)

PKF UAE can provide the following services as regards Excise.

  • Analysis of the effect of Excise on your business
  • Advice on management of the Excise transaction process
  • Support in invoicing and documentation process
  • Guidance on the requirement of appropriate accounting systems under Excise
  • Advice on IT system migration to align with legal compliance.
  • Advise and assist on Excise Tax registration and related compliances

Kindly contact us for more information!