Introduction
The UAE’s Ministry of Finance has introduced Ministerial Decision No. 1 of 2025, a critical update to the framework governing excise tax implementation. This decision, effective from January 3, 2025, focuses on refining the classification and pricing mechanisms for excise goods, particularly those related to electronic smoking devices, liquids, and concentrates.
Electronic Smoking Products
Ministerial Decision No. 1 of 2025 streamlines the taxation framework for electronic smoking products including liquids, devices, and tools.
- Liquids Used in Electronic Smoking Devices: Liquids, irrespective of their nicotine content, fall under the excise tax framework, using the harmonized system codes specified in Chapter Twenty-Four of the GCC’s Common Goods Classification Schedule.
- Electronic Smoking Devices and Tools: Devices and tools used for electronic smoking, whether containing nicotine or tobacco, are classified under Chapter Eighty-Five of the harmonized system codes. Specific items include:
- Reusable electronic cigarette devices
- Electronic water pipes or “shishas”
- Electrically heated devices for cigarettes
- Accessories for these devices, excluding batteries
Excise Price Determination for Concentrates, Powders, Gels, and Extracts
Article 3 of Ministerial Decision No. 1 of 2025 establishes comprehensive rules for determining the excise price of concentrates, powders, gels, and extracts that can be transformed into drinks. This includes carbonated drinks, energy drinks, or sweetened drinks prepared by mixing these products with other substances.
Calculation of Excise Price
The excise price for these products is the higher of:
- The standard price published by the Authority in a standard price list, if applicable.
- The designated selling price declared by the importer or producer before applying discounts, with excise tax deducted as per the mechanism outlined in Clause (2) of Article (13) of Cabinet Decision No. 52 of 2019.
Designated Selling Price Definition
The “designated selling price” is equated to the “designated retail sales price,” providing a benchmark for tax calculations. This ensures uniformity in excise tax application and avoids ambiguity in pricing structures.
Application to Non-Standard Products
For products not listed in the standard price list, the excise price is calculated exclusively under Clause (1) of Article (13) of Cabinet Decision No. 52 of 2019. This ensures a fallback mechanism for calculating the tax base.
Record-Keeping Requirements
Taxable persons are required to maintain detailed records to substantiate:
- The declared selling price of excise goods.
- Any deductions applied to these goods.
- The quantities sold.
Abrogation of Previous Decisions
This decision supersedes Ministerial Decision No. 236 of 2019, effectively rendering it void. Additionally, any provisions conflicting with the new rules are officially repealed, streamlining the legislative framework.
Final Thoughts on UAE Excise Tax Update 2025
Ministerial Decision No. 1 of 2025 reinforces the UAE’s forward-thinking approach to taxation, as highlighted in the UAE Excise Tax Update 2025. Businesses are encouraged to collaborate with tax professionals to adapt effectively.
At RVG Chartered Accountants, our tax experts provide tailored guidance to help clients stay compliant and optimize their strategies, aligning with the UAE’s evolving tax landscape.
