How To Differentiate Between Excise Tax and VAT in UAE?
The introduction of Excise Duty & VAT happened almost the same time (i.e. 2017-18) in UAE. Both are a form of indirect taxation levied on selected goods & services for various purposes which leads to additional revenue for the government in UAE.
It can be a bit difficult for people to clearly understand the difference between these two terms and they usually require to approach a reliable tax consultancy services provider for assistance in registration for these prevailing tax systems in UAE.
Let us ease you a little by explaining the difference between excise tax and vat services in detail:
What are Vat & Excise taxes?
VAT: A value-added tax (VAT) is an indirect tax imposed on goods consumption and services in UAE. This tax was imposed for the purpose of creating a new source of income for the government which is utilizable for providing high-quality services to citizens like public transports. All major goods and services in UAE are chargeable under VAT excluding; financial services, residential buildings, and bare lands as per the norms of VAT registration in Dubai.
Excise Tax: Another form of indirect tax imposed on goods harmful for human health or the environment. The sole purpose of Excise Tax is reducing the consumption of unhealthy goods while increasing the government’s revenue that can be utilized for citizen welfare. Certain services and goods such as carbonated drinks (aerated drinks excluding unflavored water), energy drinks (i.e. drinks containing caffeine, taurine, ginseng, and guarana) and Tobacco (products listed in schedule 24 of GCC Common Customs Tariff) falls under Excise taxation.
Percentage of Excise & VAT
Excise Tax: Carbonated Drinks- 50%, whereas Energy Drinks & Tobacco have 100% tax imposed on them.
VAT: The Standard rate of VAT is 5% in UAE excluding international transportation and export/ import of goods or services.
How to register your business?
The business houses involved activities like; imports of goods or production of goods for consumption in UAE markets or stocking taxable goods must register for Excise Tax.
Moreover, VAT is applied on all tax registered businesses in UAE excluding some designated or free zones which are considered tax free.
The applicability of Excise tax is done only once in a supply chain, but businesses subjected to taxation and purchasing taxable goods remains ineligible for getting a refund. However, if a taxable good is used to again produce a “new” taxable good or same is exported outside UAE are eligible for refunds too.
VAT refund is applicable only if a business or individual has more tax on purchases than the output tax collected. Even tourists visiting UAE can claim a refund on the VAT paid during the trip.
VAT Consultants Dubai
Introduction of Excise & VAT taxes added newer responsibilities for businesses. Tax Consultancy is leading Service Tax Consultants in Dubai having assisted various businesses in top-notch tax consultancy services in UAE.