Excise Taxes : What It Is and How It Works, With Examples
What Is an Excise Taxes ?
An excise tax is a legislated tax on specific goods or services at the time they are purchased. They’re intranational taxes imposed within a government infrastructure rather than international taxes imposed across country borders.
How an Excise Taxes Work
Excise taxes are primarily for businesses. Many of them are paid by merchants who then pass the tax on to consumers through higher prices. Merchants pay excise taxes to wholesalers and consider them in product pricing which increases the retail price overall.
As such, consumers may or may not see the cost of most excise taxes directly. But there are some excise taxes that are paid directly by consumers, including property taxes and levies on certain retirement account activities.
Excise taxes are primarily business taxes. They are separate from other taxes that corporations must pay, such as income taxes. Businesses charging and receiving excise taxes are required to file Form 720 Federal Excise Tax Return on a quarterly basis and include quarterly payments. Business collectors of excise taxes must also maintain their obligations for passing on excise taxes to state and local governments as required. Merchants may be allowed deductions or credits on their annual income tax returns related to excise tax payments.
Excise taxes can fall into one of two categories:
- Ad Valorem Taxes: Excise taxes that are fixed percentage rates assessed on particular goods or services.
- Specific Taxes: Excise taxes of a fixed dollar amount applied to certain purchases.
Who Pays Excise Taxes?
Excise taxes are imposed on certain goods and services, such as gasoline and alcohol. These taxes are paid directly by businesses. This tax is often passed on to the consumer, who may or may not be aware that they’re paying it to the merchant because it’s included in the price. This is common in the fuel industry, where companies charge excise taxes through the price you pay at the pump.
How to register?
The FTA’s online portal (the e-Services portal) is available on the FTA’s website (www.tax.gov.ae) for the purposes of registering businesses for excise tax. Businesses are required to complete the questions on the online portal and are required to upload supporting documents in order to confirm their business status and activities.
Businesses will then receive notification of the outcome of their registration application from the FTA once the application has been processed. Further detailed guidance on completion of the appropriate registration forms can be found on the FTA website.
When am I eligible for deductible tax?
Deductible tax can be included on the excise tax return for the period in which the event which gave rise to the deductible tax occurred. Where the deductible tax is not included on that excise tax return, it may be included on the taxable person’s excise tax return at the earliest opportunity. The FTA may request the taxable person to provide reasonable evidence to support the event which gave rise to the deductible tax. In the event that the value of deductible tax exceeds the excise tax payable on the taxable person’s excise tax return, the taxable person will be required to follow the procedure set out in Section 9.4 in relation to obtaining refunds of excise tax paid.
Who is responsible to register for excise tax?
Any business involved in the following processes is responsible to register for excise tax within 30 days after the opening of the business or the effective date of the law, whichever is earlier.
- Importing excisable goods into UAE
- Producing excise goods for consumption in the UAE
- Stockpiling of excise goods in a particular instance
- Overseer of an excise warehouses
As our living is dependent on various products, the products to be registered for excise tax are mentioned below:
- Carbonated drinks include any aerated beverage except for unflavoured aerated water.
- Energy drinks include any beverages which are marketed, or sold as an energy drink, and containing stimulant substances that provide mental and physical stimulation, which includes without limitation: caffeine, taurine, ginseng and guarana.
- Tobacco and tobacco products
Do I Have To Pay an Excise Tax?
Individuals don’t directly pay excise taxes to the federal government, but these ultimately funds come out of their pockets just the same. The tax is typically included or factored into the retail price of the product or service that’s purchased.
Let’s say you pay $4 for a gallon of gasoline. Most of that price is paid for the gasoline that went into your tank, but not all of it. A portion went to the “hidden” excise tax. The tax won’t be cited or delineated on your receipt as a sales tax would.
How AHG can help you in the Excise Tax?
Since AHG ’s an Approved Tax Agency in the FTA of UAE and one of the leading Tax Agencies who is specialized in the Excise Taxes, AHG’s Services range from Tax Registration, Tax Filing, Tax consultancy, Warehouse Keepers and Designated Zones Registration, Stock and Duty Calculation, Advice on Stockpilers, Tax Agent, Digital Tax Stamps Filing Disputes, Representation in front of the FTA of UAE
