Tax alert

Ministry of Finance explains new excise tax system

The UAEs Ministry of Finance held an excise tax awareness session in Dubai on 10 May 2017. The
session explained the new excise tax system for those involved in the importation, production and sale
of excisable goods.

We understand that the excise tax treaty has been approved and signed by all the GCC member
states. Under the treaty, an excise tax will be imposed on goods considered harmful to human health
and the environment, as well as on luxury goods, wherever such goods are produced. While each
GCC country can individually decide tax rates and which goods are taxable in their national tax law,
excise taxes have been capped at 100 percent.

The ministry intends to impose excise taxes in the UAE on tobacco and tobacco products and
carbonated and energy drinks by the end of 2017. The draft excise tax law was approved by the
Federal National Council in March 2017 and the final excise tax law is expected to be published before
30 June 2017. Proposed excise tax rates in the UAE to be imposed on top of retail sale prices are:

100% for tobacco and tobacco products

100% for energy drinks
50% for carbonated drinks.
Where there is no retail sale price, the average price of the good will be used to assess its excisable
value.

Where goods are imported into the UAE, the importer is responsible for paying the correct excise tax
to the Federal Tax Authority (FTA) before removing the goods from the designated storage area. For
locally produced goods, the producer must pay the excise tax to the FTA before removing the goods
from the place of production.
We understand that the excise tax law will include provisions for:

Anti-avoidance and anti-evasion measures

Excisable goods stockpiled before the effective date of the excise tax
Exemptions and refunds, such as where excise goods are used to produce other excise
goods, overpayments and errors.
Certain parties - such as diplomatic and consular missions - to apply for exemptions from
excise taxes through a refund scheme
A tax procedure law for the UAE, regulating all taxes including VAT and the excise tax, has also been
approved and will be publicly available shortly. The tax procedure law establishes:

How tax revenues will be assessed, collected and controlled

The rights and obligations of taxpayers - including how taxpayers should register
Tax offences, violations and fines, including interest on unpaid taxes and the costs of enforced
collection
The Ministry of Finance will be releasing an excise taxpayers guide, publications, notices and e-
Learning modules, as well as setting up an excise tax helpline.

The excise tax registration process will be available online - through the FTA website - in the third
quarter of 2017. By the fourth quarter of 2017, any business dealing in taxable goods in the UAE must
have registered for excise tax.

Once the excise tax law is implemented, businesses will be required to file an excise tax return every
month. Due taxes must be paid within 15 days of the end of every month. Filing and paying will be
done online.

Excise taxes will significantly impact customer prices on the three categories of goods. Businesses
dealing in these goods should carefully review their pricing strategies, determine the full impact of the
excise tax and ensure they understand what needs to be done to be fully compliant.
KPMG will continue to keep you informed of excise tax developments. If you have any questions,
please do not hesitate to contact us.

Contact us:
Ashok Hariharan Clare McColl
Partner | Head of Tax Partner | Head of Indirect Tax
KPMG in the Lower Gulf KPMG in the UAE
+968 2474 9231 +971 4 424 8959
Nilesh Ashar Arjun Nandakumar
Partner | Head of Tax Senior Manager | Indirect Tax
KPMG in the UAE KPMG in the UAE
+971 4 424 8987 +9714 424 8999

www.kpmg.com/ae
2017 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG
International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm
vis--vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour
to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be
accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

The KPMG name and logo are registered trademarks or trademarks of KPMG International.