DUBAI 22 August 2019: The UAE Cabinet has set the minimum excise duty on tobacco products of not less than Dh0.4 per cigarette, and Dh0.1 dirhams per gram of hookah tobacco, ready-to-use tobacco and similar products.
In addition to the goods currently subject to excise tax (i.e. tobacco products, soft drinks and energy drinks), excise tax will also be imposed on e-cigarettes and the liquids used with them, as well as beverages sweetened with added sugar.
The Ministry of Finance has announced amendments of Cabinet Resolution No. (38) of 2017 regarding excise goods, excise tax rates and the formula to calculate the excise price. The Minister of Finance will issue a decision on the implementation date, which is set to be before 1 January 2020.
Pursuant to these amendments, effective 1 January 2020, a 100% excise tax on electronic smoking appliances and liquids used in these devices, and 50% excise tax on beverages and sugary drinks has been set.
These goods were identified in addition to existing excise goods such as tobacco and tobacco products (100%), energy drinks (100%) and soft drinks (50%).
The decision also specified the formula of calculating the excise and retail price, and the Federal Tax Authority (FTA) shall have the power to determine the procedures necessary to prove the classification of any product as an excise good.
Since 2017
The UAE started applying excise tax as of October 1, 2017.
The decision was taken to rationalize consumer behavior relating to harmful products and contributes to raising public health. This decision is in line with the UAE’s commitment to implementing the GCC Unified Agreement for Excise Taxes and to complement efforts to achieve economic integration among the GCC countries, said Wam.
Obaid bin Humaid Al Tayer, Minister of State for Financial Affairs: “The Ministry of Finance conducted in-depth studies on the direct and indirect negative effects of health-harmful consumption patterns, including tobacco products, electronic tobacco and sugar-sweetened beverages. The cabinet decision aims to correct these harmful patterns and provide the appropriate legislation to regulate excise tax in order to achieve the government goals in ensuring the health and well-being of all members of the society and to achieve the third objective of the Sustainable Development Goals (SGDs) of ensuring healthy lives and promoting wellbeing for all at all ages.”
Studies on regulating the tax treatment of excise tax have been prepared in line with international best practices and have been based on the results of data from the local market. The Ministry of Finance has also examined the economic and social impact of the excise tax added and referred to above and showed a positive impact in reducing the consumption of the harmful goods included in the Cabinet decision, and very little in terms of GDP and employment, thus keeping the state competitive.
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