12 Dec 2019
UAE: Excise Tax on Sweetened Drinks and E-Cigarette Products Now in Force
Sweetened beverages and vaping products will now be subject to United Arab Emirates (UAE) excise duty, effective from 1 December.
The change comes following Cabinet Decision No.52 of 2019 on Excise Goods, Excise Tax Rates and the Methods of Calculating the Excise Price, prompting the Federal Tax Authority (FTA) of the UAE to expand its list of excisable taxable products to include sweet drinks, plus e-cigarettes and related products. The document can be found on FTA website.
Under the previous regulation, Cabinet Decision No.38 of 2017, excise duty of 100% was payable on energy drinks, tobacco and tobacco products and 50% payable on carbonated drinks. This has now been extended to include 50% tax on sweetened beverages, and 100% on electronic smoking devices and tools, as well as the liquids used in such tools.
According to the new law, sweetened drinks include any products that have added sugar (as determined under GSO Standard 148) or other sweeteners (as determined under GSO Standard 995), whether in the form of a beverage, liquid, concentrate, powder, extract, or any product that may be converted into a drink. Energy drinks are considered as those that contain stimulant substances that provide mental and physical stimulation, including but not limited to caffeine, taurine, ginseng and guarana.
There are exclusions, however. Excise tax will not be applicable to beverages containing a minimum of 75% milk or milk substitutes, baby formula, and baby food. Beverages consumed for special dietary requirements as defined under GSO Standard 654 and related standards, and those consumed for a medical purpose as defined under GSO Standard 1366 and related standards, will also not attract excise tax.
Details on e-cigarette products are covered in the implementations rules contained in Ministerial Decision No. 236 of 2019, which can be accessed via FTA website . It notes that tax will be imposed on liquids used in electronic smoking devices and tools regardless of whether they contain nicotine or not, pursuant to customs HS codes 38249999; 85437031; 85437032, and 85437039.
The move by UAE authorities to impose taxes on these products is not the first in the Gulf region. It follows a similar excise tax introduced by Saudi Arabia which came into effect in May 2019 and also targeted sweetened beverages and electronic smoking appliances and tools with rates of 50% and 100% excise tax respectively.