Legal Update: The United Arab Emirates introduces Excise Tax Law
United Arab Emirates (the UAE) have promulgated the new Excise Tax Regulation. The new law comprised of eleven chapters and 30 sections aims at imposing the tax on 'Excise Goods". The term 'Excise Goods' is defined as 'Goods that will be determined as being subject to Tax by a Cabinet Decision upon the recommendation of the Minister.'
Chapter 2, Article 2 dealing with Implementation, Scope, and Calculation of Tax provides that provisions of this new Decree-Law shall apply to Excise Goods as may be specified by a Cabinet Decision at the suggestion of the Minister of Finance (Article 2(1). The tax shall be imposed on production, import, release and stockpiling of Excise Goods where any such activity takes place (Article 2(2). Chapter 3, Article 5 specifies tax registration and deregistration procedure. Pursuant to this article every natural or legal person is prohibited from conducting any activities that fall within clause Article 2(2). This article also imposes an obligation on the natural and legal person(s) to apply for tax registration as prescribed in Federal Law Number 7 of 2017 on Tax Procedures.
Article 6 sets out exceptions from registration and covers instances where the Federal Tax Authority may grant an exception from tax registration. However such persons should notify the Federal Tax Authority in the event of a change in his status which would make him subject to tax under this Decree-Law.
Article 8 of this new regulation requires any person operating (or; those who intend to operate) a free zone to apply for registration as a Warehouse Keeper. Article 10 clarifies rules pertaining to tax payment and exemption. Tax computation shall be calculated as per the following dates:-
1. The date of Import of Excise Goods.
2. The date on which the Excise Goods were acquired by the stockpiler, and if such acquisition has happened prior to promulgation of this Decree-Law, the date of tax calculation shall be the effective date on which the Decree-Law is passed.
3. With the exception of (1) and (2) above, Tax shall be calculated based on the date on which Excise Goods were released for consumption.
Article 12 provides that Excise Goods that are exported shall be exempt from tax. This clarifies that the tax shall not apply to any overseas exports.
Article 23 sets out Instances of Tax Evasion whereas Article 22 prescribes violations and penalties. Article 24 of the Decree-Law clarifies the record keeping and documentary evidence requirements. These include records of all produced, imported or stockpiled Excise Goods, records of exported Excise Goods and evidence of such Export, records of stock levels, tax records on imported, manufactured, and stockpiled goods.
Article 30 of the Decree Law dealing with Publication and Application of the Decree Law. The Decree-Law shall be published in the Official Gazette of UAE and will come in to effect from 1 October 2017.