Excise tax is one type of indirect tax that is applied in many countries around the globe. It is normally less progressive than income tax but more regressive than wealth tax. The basic function of the Excise tax in Dubai is to make revenue for the federal government. The tax rates are fixed by law and cannot be raised at any stage.
The Dubai tax system is based on a series of tax rulings that were issued in 1969, but in 2021 the Dubai government issued many new tax laws. These new laws refer to the establishment of the special low-income status and the general value-added tax. The imposition of the Excise tax agent UAE on goods and services is based on the rates permitted by law and is based on the purchase price of the good. The rate of Excise tax on the sale or transfer of ownership of immovable properties is also based on the depreciated value of the property. The imposition of Excise tax on the following goods and services is prohibited: gifts, inheritances, interest, dividends, payments or installments, purchases, advances, revenues, gifts, payment or supply of money, inheritances, and capital gains.
On the other hand, the definition of ‘gift' is any material gift made to another person, whether by a family member or a friend. If you intend to increase the size of your business or receive any salary increase due to an inheritance from your employer, you need to pay tax on this gift no matter what the purpose of the gift was. In addition, if you own a business and intend to increase the number of employees or buy some raw materials, you have to pay both personal income tax and corporate tax on the increase. Business owners may deduct a portion of their income tax on the corporate tax paid by them.
There are also certain types of exchange trade that are exempted from the tax on gifts. These include the sale of goods at less than market value to another foreign country, the supply of goods for emergency conditions, and the transportation of personnel or equipment by a government agency abroad. Certain types of charitable donations and some insurance transactions between individuals are not subject to any tax in Dubai. However, indirect tax is levied on the income derived from many activities of a business organization. These include the income earned through the sale of goods and provision of services, lease payment, and service payments, and investment.
Excise Tax in Dubai is levied at a rate of 40% on the total retail price (RTR) of all merchandise. Excise tax on food items such as oil and petroleum products, alcoholic beverages, cigarettes, chewing gum, and drugs are prohibited. Certain types of entertainment are exempted from Excise tax in Dubai. These include sports events and cultural shows, cultural exhibitions, and theatrical performances. Certain cultural festivals such as the Lebanese International Film Festival and the Dubai Festival, are exempt from the Excise tax.
Businessmen must register with the Dubai Commercial Registration Board (DCRB) before they can trade in the city. Their registration makes them liable to be taxed on all purchases of goods and services made in Dubai by Excise Tax UAE. They are required to pay a one-off fee called the franchise tax for each individual who shops or conducts business in Dubai using their ID card. The Dubai Ministry of Economic Development classifies business entries according to specific excise taxes and customs duties. These are as follows:
