How To Pay VAT and Excise Tax in the UAE

How To Pay VAT and Excise Tax in the UAE

According to UAE’s Government site, “VAT and excise tax registered businesses must pay their tax dues electronically through the website of Federal Tax Authority.”

However, it is important to note that UAE does not levy income tax on individuals. It only levies corporate tax on oil companies and foreign banks. 

Excise tax, on the other hand, is levied on specific goods which are usually found harmful to human health or environment. 

Lastly, Value Added Tax (or VAT) is levied on the majority of goods and services. 

What is the difference between VAT and excise tax?

Value Added Tax (or VAT) was first introduced in the UAE on January 1, 2018 with the rate of 5 (%) percent. The UAE is expecting to open up a new income stream through VAT, which will then be continued to be utilised in providing high-quality public services. 

This will also help the government move towards its vision of reducing dependence on oil and other hydrocarbons as a source of revenue.

Excise tax, however, was introduced across the UAE way back in 2017. It is a form of indirect tax levied on specific goods that are otherwise classified as “excise goods” or goods that are harmful to human health or the environment. 

How To Pay VAT and Excise Tax in the UAE
How To Pay VAT and Excise Tax in the UAE

The UAE follows these excise tax rates for the following goods:

  • 50 (%) percent for carbonated drinks
  • 100 (%) percent for tobacco products
  • 100 (%) percent for energy drinks

What is the purpose behind levying excise tax? 

As per the UAE Government’s site, it says, “The UAE Government is levying excise tax to reduce consumption of unhealthy and harmful commodities while also raising revenues for the government that can be spent on beneficial public services.”

In turn, consumers will need to pay more in order to purchase goods that are considered harmful to human health or the environment.

Now how do you pay for VAT and excise tax in the UAE? 

As soon as you have registered for VAT, you are required to do the following:

  1. File your VAT return
  2. Make related VAT payment

Both within 28 days from the end of your tax period.

Remember, it is important to submit accurate VAT returns to the FTA on/before the required deadline. Failure to do so will result to incurring tax assessments and penalties. 

Here’s how to file VAT returns and make payments –

  1. Visit tax.gov.ae and login to the e-Services portal using your registered username and password
  2. Click the VAT tab on the navigation bar and open your VAT Return
  3. Once completed, submit your VAT Return or pay the VAT liability

For more information on filing VAT returns and making payments, click here.

How To Pay VAT and Excise Tax in the UAE
How To Pay VAT and Excise Tax in the UAE

Once you have registered for excise tax, you are required to file your excise tax return by the 15th day following the end of each tax period.

Here’s how to file excise tax and make payments –

  1. Create an e-Services account with the FTA (make sure you do this before you register for Excise Tax)
  2. Complete the Excise Tax Registration Form
  3. Submit your Excise Tax Registration application

For a more in-depth guide on how to file your excise tax and make payments, click here.Registered businesses must pay their due tax online through the Federal Tax Authority (FTA) website using one of the options below:

How To Pay VAT and Excise Tax in the UAE
How To Pay VAT and Excise Tax in the UAE
  • Via eDirham or credit card
  • Via eDebit
  • Via bank transfer (local transfer)
  • Via bank transfer (international transfer)

For further information or assistance on filing VAT and excise tax in the UAE, contact our team at Able Consulting by calling us on +971 2 495 7075 or email info@ablelaws.com

 

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