Federal Tax Authority clarifies price-setting mechanism for Excise Tax

Following the introduction of Excise Tax in the UAE on 1st October, the Federal Tax Authority, FTA, has clarified that the Excise Goods Price List that is downloadable from its website is a reference for tax calculation only, and not for setting retail prices.

The FTA also clarified that the retail price subject to tax, known as Excise Price, of each taxable item must be the highest of the following two prices: the local market price specified in the Excise Goods Price List, available on the FTA website, or the designated retail sale price as calculated by the retailer as per the procedure specified in the Taxable Persons Guide for Excise Tax.

The FTA said that some brands of goods that are not yet on the list will be still subject to Excise Tax. As such, the authority has requested that producers or importers of goods likely to be subject to Excise Tax, including energy drinks, carbonated drinks and tobacco products, inform the FTA through its website of brands that should be added to the list.

"The registration process for Excise Tax is well on track and we now have an extensive database of excise taxable persons," said Khalid Al Bustani, Director-General of the FTA, adding, "The FTA continues to receive applications for registration through our website, and we have already started receiving import declarations. We encourage all institutions that are subject to Excise Tax, as per the law, to register through the website, where, in addition to conducting their transactions seamlessly, they can gain access to a wealth of information, learn their rights and obligations and ensure that their organisations are protected from penalties."

Al Bustani went on to explain that fixing the prices of products for retail is not within the jurisdiction of the FTA, it’s the duty of other departments to monitor the prices according to the mechanism set out in the Federal laws.

The list of retail prices used as a basis for tax calculation was compiled with the cooperation of retailers.

According to Cabinet Decision No.38 of 2017 on Excise Goods, Excise Tax Rates and the Method of Calculating the Excise Price, from 1st October, carbonated beverages are taxed at 50 percent and tobacco products and energy drinks at 100 percent. Carbonated beverages include all aerated beverages with the exception of non-flavoured aerated water, as well as any concentrates, gels or extracts that can be processed into carbonated drinks.

Energy drinks, meanwhile, include beverages that may contain stimulants or substances that induce mental or physical stimulation, including but not limited to: caffeine, taurine, ginseng and guarana, as well as any substances with similar effects.