Federal Tax Authority Extends The Excise Tax

On the 1st of October 2017, the Federal Tax Authority (FTA) implemented an Excise Tax on certain products, including 100% on both tobacco-related products and energy drinks and 50% tax on carbonated drinks.

BSA traces its roots to 2001 when it was first founded in Dubai, with the primary mission of offering legal services that combine comprehensive knowledge of local law with a modernised and progressive approach to legal practice.

Due to the success of these taxes in reducing the consumption of these products, the FTA, as per Cabinet Decision No (52) of 2019, has chosen to extend this Excise Tax, as follows:

• 100% on any liquids used in electronic smoking devices and tools, regardless of it containing nicotine, in accordance with the Customs Codes as determined by a decision issued by the Finance Minister;
• 100% on any electronic smoking devices and tools, regardless of it containing tobacco or nicotine, in accordance with the Customs Codes as determined by a decision issued by the Finance Minister; and

50% on any sweetened drinks, including any products to which sugar or other sweeteners are added and produces:

• ready-to-drink beverages;
• concentrates, powders, gels, extracts or any form that can be converted into a sweetened drink;
• any type of sugar determined under Standard 148 of the GCC Standardisation Organisation under the heading “Sugar”; and
• any type of sweeteners determined under Standard 995 of the GCC Standardisation Organisation under the heading “Sweeteners Permitted in Food”.

Products which will be exempt from the definition of sweetened drinks and therefore not subject to the new Excise Taxes include:

• ready-to-drink beverages containing at least 75% milk;
• ready-to-drink beverages containing at least 75% milk substitutes;
• baby formula, follow up formula or baby food;
• beverages consumed for special dietary needs, as determined under Standard 654 of the GCC Standardisation Organisation under the heading “General Requirements for Pre-packaged Foods for Special Dietary Use”; and
• beverages consumed for medical uses as determined under Standard 1366 of the GCC Standardisation Organisation under the heading “General Requirements for Handling of Foods for Special Medical Purposes”.

The expansion of the Excise Tax on the additional products shall take effect on the 1st of December 2019.

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