Excise Tax Return in the UAE: A Comprehensive Guide
Since the introduction of excise tax in the UAE in 2017, businesses dealing with specific goods, such as tobacco products, energy drinks, carbonated drinks, and other products considered harmful to health or the environment, have been required to comply with the excise tax regulations. This tax is imposed at the point of production or import, and it is the responsibility of businesses involved in such transactions to ensure timely and accurate filing of their excise tax returns.
Understanding excise tax return filing is crucial for businesses in the UAE to remain compliant and avoid penalties. In this blog, we will explore the essentials of excise tax returns in the UAE, including the process, deadlines, and common challenges businesses face.
What is Excise Tax?
Excise tax in the UAE is a form of indirect tax imposed on specific goods that are harmful to health or the environment. The main categories of goods subject to excise tax include:
- Tobacco products
- Energy drinks
- Carbonated drinks
- Sweetened drinks
- Electronic smoking devices (e-cigarettes, shisha, etc.)
- Other products that have an environmental or health impact
The excise tax is levied at different rates depending on the product:
- 100% tax rate on tobacco products and energy drinks
- 50% tax rate on carbonated drinks and sweetened drinks
- Other rates may apply to additional products as specified by the UAE government.
Who Needs to File an Excise Tax Return?
Any business that imports, manufactures, or produces excise goods in the UAE is required to register for excise tax with the UAE Federal Tax Authority (FTA). Once registered, businesses must file regular excise tax returns detailing the tax collected and paid during the relevant period. This applies to both local manufacturers and importers of excise goods.
Businesses involved in the sale of excise goods, whether directly or through intermediaries, must file excise tax returns even if they don’t produce the goods themselves. If a company doesn’t comply with the excise tax regulations, they risk facing penalties, fines, and even legal action.
Excise Tax Return Filing Process
Filing an excise tax return in the UAE involves several important steps. Below is a breakdown of the process:
1. Registering for Excise Tax
Before a business can file excise tax returns, it must first register with the UAE Federal Tax Authority (FTA). The registration process involves submitting relevant business information, including:
- Business name
- Business activity type
- Import/export details
- Contact information
- Financial details
- Details of excise goods being handled
Upon approval, the business will receive an excise tax registration number, which is used when submitting returns and communicating with the FTA.
2. Filing Period
Excise tax returns in the UAE must be submitted on a monthly basis. This means that businesses must file their excise tax return within 28 days of the end of each month. For example, the excise tax return for the month of January is due by the 28th of February.
The returns must detail the amount of excise tax owed based on the goods produced or imported during the month. Businesses are required to report the volume of excise goods sold, produced, or imported, as well as the corresponding tax.
3. Filing the Return Online
All excise tax returns are filed through the FTA e-Services portal. This user-friendly platform allows businesses to submit their tax returns online, ensuring a streamlined and efficient process. The steps to file the return are as follows:
- Log in to the FTA e-Services portal using your registered credentials.
- Select the Excise Tax Return option from the available services.
- Complete the tax return form with accurate data, including the total quantity of excise goods produced, imported, or sold during the reporting period.
- Calculate the excise tax liability using the correct tax rate for each type of product.
- Submit the return and pay any outstanding tax amounts.
4. Payment of Excise Tax
In addition to submitting the tax return, businesses must also make the necessary payments. The payment for excise tax is due at the same time as the filing deadline. Failure to make timely payments can result in penalties and interest charges.
Payments can be made through the FTA’s secure online payment system using a variety of methods, including bank transfers or credit/debit cards.
5. Keep Records for Audit
As part of the excise tax compliance requirements, businesses are also obligated to maintain detailed records of their excise goods, sales, and tax returns. These records must be kept for a minimum of five years and be made available to the FTA upon request. Proper record-keeping is essential in case of an audit or investigation by the FTA.
Common Challenges in Filing Excise Tax Returns
While the excise tax return process is straightforward, businesses may face several challenges during filing:
1. Data Accuracy
Accurate data is essential when filing excise tax returns. Businesses need to maintain up-to-date records on the quantity and value of excise goods sold, imported, or produced. Any discrepancies in the data can lead to errors in the tax return, which could result in penalties or delays.
2. Compliance with Tax Rates
It is essential for businesses to ensure they are applying the correct tax rates for each type of excise good. Misclassifying products or applying incorrect tax rates could lead to underreporting of tax liabilities or the imposition of fines.
3. Timely Filing and Payments
Given that excise tax returns are due on a monthly basis, businesses must remain vigilant about filing on time. Late filing and payments may result in financial penalties and interest charges, which could add up quickly. Automating tax filing systems or utilizing the services of a tax consultant can help ensure timely submission.
4. Handling Audits
The UAE's Federal Tax Authority may audit a company’s excise tax filings to ensure that they are in compliance with regulations. A company’s records must be transparent and organized to avoid any issues during an audit. Failure to provide accurate documentation can result in additional penalties and fees.
Penalties for Non-Compliance
Failure to comply with excise tax regulations in the UAE can result in various penalties. Some common penalties include:
- Late Filing Penalties: A penalty is imposed for every day a tax return is filed after the due date. This can accumulate quickly, leading to significant fines.
- Under-Reporting: If a business is found to have underreported its excise tax liability, it may face fines and interest charges on the outstanding amount.
- Failure to Maintain Records: Businesses that do not keep proper records for the required five years may face penalties.
How Tulpar Global Taxation Can Help
For businesses in the UAE dealing with excise tax, Tulpar Global Taxation offers professional assistance with the registration, filing, and compliance aspects of excise tax. Our team of experts can guide you through the entire process, ensuring accurate and timely submissions, minimizing tax liabilities, and helping you navigate the complexities of excise tax laws.
We offer services such as:
- Excise Tax Registration: Assisting businesses in registering with the FTA and obtaining the necessary tax numbers.
- Excise Tax Return Filing: Ensuring that tax returns are submitted on time and with accurate information.
- Tax Consulting: Offering expert advice on excise tax matters, including optimizing your tax position.
- Record-Keeping: Providing guidance on maintaining proper records in line with FTA requirements.
By partnering with Tulpar Global Taxation, businesses can stay compliant with excise tax regulations, mitigate risks, and avoid costly penalties.
Conclusion
Excise tax in the UAE is an essential part of the country’s tax framework, and businesses involved in the sale or production of excise goods must ensure they comply with the regulations. Timely filing of excise tax returns and accurate record-keeping are essential to avoid penalties and ensure smooth operations. By working with experienced professionals like Tulpar Global Taxation, businesses can simplify the filing process, manage tax liabilities effectively, and stay compliant with all applicable laws and regulations.
