UAE to implement tobacco, soft drinks tax in October

The UAE will begin implementing a selective tax on tobacco products, energy drinks and soft drinks on October 1, the country’s Ministry of Finance has announced.

HE Younis Haji Al Khouri, undersecretary of the Ministry of Finance, confirmed the start date in a statement to state news agency WAM.

He said the tax would be imposed on all selective goods consumed inside the country, even if they are in free zones and airports.

However, it will not apply to goods that accompany travellers out of the country, suggesting prices will remain the same on products in airport duty free departure areas.

The tax rates are 100 per cent for tobacco products and energy drinks and 50 per cent for soft drinks, according to the official.

Preliminary estimates suggest the tax will add Dhs7bn ($1.9bn) a year to the state budget.

Yesterday, UAE President Sheikh Khalifa bin Zayed Al Nahyan issued a federal decree law on the excise tax confirming how it would be applied to businesses and which parties would be responsible for payment.

Read: UAE President issues federal excise tax law for tobacco, soft drinks

The tax is being implemented across the Gulf Cooperation Council following an agreement reached in December.

Saudi Arabia was the first to implement it in June this year. In the build-up, the kingdom’s importers and wholesalers were accused of hoarding products to make a quick profit after the official start date.

Read: Saudi importers, wholesalers accused of hoarding as new tobacco tax comes into effect

On top of products deemed harmful to human health, the law can also be applied to luxury goods but there has been no confirmation as to what items will be affected.

Al Khouri said “there are no lists of other commodities at present”.

The maximum selective tax rate on any item is 200 per cent.