How to File Your Excise Tax Return in UAE & Avoid Costly Errors

Filing an excise tax return in the UAE is a legal requirement for businesses that deal with tobacco, vape products, energy drinks, soft drinks, and other excise-taxed goods. The process may seem straightforward, but many companies make errors that lead to penalties, tax reassessments, and compliance issues.

Mistakes such as incorrect tax calculations, missing deadlines, or failing to declare taxable stock can result in significant fines from the Federal Tax Authority (FTA). Whether you are a manufacturer, importer, distributor, or warehouse operator, understanding how to file your excise tax return correctly is essential for avoiding financial losses and ensuring smooth operations.

This guide explains how to prepare, file, and review your excise tax return while avoiding common mistakes that could lead to costly compliance issues.

Who Needs to File an Excise Tax Return in the UAE?

Businesses that manufacture, import, or store excise goods must file excise tax returns every month. If a company holds or distributes excise goods, it must also comply with tax filing requirements.

Excise tax applies to specific categories of products that are considered harmful to public health or the environment. The main taxable goods include:

1. Tobacco products such as cigarettes, shisha, and heated tobacco.
2. Electronic smoking devices and vape liquids (both nicotine and non-nicotine).
3. Energy drinks containing caffeine, taurine, or other stimulants.
4. Carbonated and sweetened beverages with added sugar or artificial sweeteners.

If a business fails to file excise tax returns on time, it may face penalties starting at AED 1,000, which increase for repeated offenses. Filing accurately and on time is essential to maintain compliance and avoid unnecessary financial burdens.

Step 1: Prepare Your Excise Tax Data Before Filing

Filing an excise tax return requires accurate data collection and proper documentation. Businesses must prepare detailed records before logging into the FTA e-Services portal to file their tax return.

To ensure a smooth tax filing process, businesses should:

1. Gather all purchase invoices for excise goods to confirm the amount of tax already paid on imported or acquired stock.
2. Track sales data and stock movements to ensure that all taxable goods are declared correctly.
3. Maintain warehouse records to report any stored excise goods that may affect tax calculations.
4. Verify tax rates for each product category to avoid incorrect tax reporting.

Having organized financial and inventory records helps businesses file returns faster and reduces the risk of misreporting.

Step 2: Log Into the FTA e-Services Portal

Excise tax returns must be filed through the FTA’s online system. Businesses must log into their FTA e-Services account using their Tax Registration Number (TRN) and secure login credentials.

After logging in, the business should navigate to the Excise Tax Return section, where they will find the necessary forms to report taxable goods and tax payments for the reporting period.

If a business has multiple excise tax obligations (e.g., importing and distributing), it must ensure that all activities are reported under the correct tax categories.

Step 3: Declare Taxable Goods Accurately

One of the most common mistakes in excise tax filing is failing to declare all taxable goods correctly. The FTA requires businesses to break down their tax declaration based on the type of excise activity.

Businesses must report excise tax based on:

1. Goods imported into the UAE, which are subject to tax at customs clearance.
2. Locally manufactured excise goods, where tax must be declared before the goods enter the market.
3. Stockpiled excise goods, including goods held in warehouses before distribution.

Each category must be declared separately, ensuring that the correct excise tax rate (50% or 100%) is applied based on the product type.

For example, if a business imports 1,000 packs of cigarettes at AED 10 per pack, the excise tax is calculated as follows:

1. 100% excise tax rate applied
2. Tax due = 1,000 x AED 10 x 100% = AED 10,000

If businesses misreport stock levels or fail to declare taxable products, the FTA may impose tax penalties or reassess tax payments, leading to unexpected costs.

Step 4: Review and Confirm Tax Payments

Once taxable goods are declared, businesses must review their tax payment summary before submission. The FTA automatically calculates the excise tax due based on the declared quantities and applicable tax rates.

Before confirming the return, businesses should:

1. Verify that all taxable products are included in the declaration.
2. Ensure that previously paid excise tax (on imports) is accounted for to avoid duplicate payments.
3. Check calculations to confirm that the correct tax amounts are reported.

Mistakes in tax calculations can lead to excessive tax payments or underreported tax liabilities, both of which can cause compliance issues.

Step 5: Submit the Excise Tax Return Before the Deadline

After reviewing all tax entries, businesses must submit the excise tax return before the filing deadline. Excise tax returns are due on the 15th of every month, covering the previous month’s taxable activities.

If a business submits its return late, it may face:

1. An AED 1,000 penalty for the first offense, increasing to AED 2,000 for repeated delays.
2. Additional fines if incorrect tax amounts were reported or underpaid.
3. FTA audits and potential trading restrictions for continuous non-compliance.

Submitting tax returns on time and without errors ensures that the business avoids penalties and maintains a strong compliance record with the FTA.

Step 6: Make the Excise Tax Payment

Once the excise tax return is submitted, businesses must pay the tax due before the deadline. Payments can be made through the FTA’s e-Dirham system or an approved UAE bank transfer.

To prevent payment delays, businesses should:

1. Ensure their bank account has sufficient funds before processing tax payments.
2. Verify payment details to match the tax return reference number, avoiding incorrect transactions.
3. Keep a record of payment confirmations to ensure that the tax payment is successfully recorded by the FTA.

Late tax payments result in daily penalties until the full amount is settled, making it essential to plan excise tax payments in advance.

Common Mistakes That Lead to Excise Tax Penalties

Filing excise tax returns in the UAE is a mandatory requirement for businesses dealing with taxable goods, but many companies make avoidable errors that result in financial penalties, audits, and compliance risks. The Federal Tax Authority (FTA) has strict guidelines, and even minor mistakes can lead to significant fines or additional tax liabilities.

To ensure full compliance and avoid costly errors, businesses must understand the most common mistakes made during excise tax filing and how to prevent them.

1. Failing to Register for Excise Tax Before Starting Business Operations

Any company that imports, manufactures, distributes, or stores excise goods must register for excise tax before conducting any taxable activities. Many businesses unknowingly begin operations without registering, believing that excise tax is handled at the retail stage.

Operating without excise tax registration can result in:

1. A penalty of AED 10,000 for failing to register on time.
2. Potential trading restrictions preventing customs clearance for excise goods.
3. Backdated tax payments, requiring businesses to settle unpaid taxes for previous transactions.

To avoid this mistake, businesses should apply for excise tax registration as soon as they plan to deal with excise goods. If a company has already started operations without registering, it must immediately submit an application to the FTA and seek professional tax guidance to minimize penalties.

2. Underreporting or Omitting Taxable Goods in Returns

Some businesses try to reduce their tax liability by under-declaring stock levels or failing to report certain excise products. Others make accidental omissions due to poor record-keeping or misclassification of products.

If the FTA conducts an audit and discovers undeclared excise goods, the business may face:

1. Severe financial penalties, including back taxes and interest charges.
2. A fine of AED 2,000 for incorrect filing, increasing for repeat offenses.
3. Increased scrutiny in future tax filings, making the company more likely to be audited.

To prevent underreporting errors, businesses should:

1. Cross-check inventory records with previous tax returns before filing.
2. Use digital tracking systems to monitor stock movement and excise product classifications.
3. Ensure that all excise goods are correctly recorded, even if they are unsold or held in warehouses.

Regular internal tax reviews and reconciliation checks can help businesses detect reporting gaps before submitting returns.

3. Using Incorrect Excise Tax Calculations

Excise tax is calculated based on the higher value between the retail selling price (RSP) and the import cost (CIF + customs duties). Businesses that use the wrong taxable value may either overpay or underpay tax, both of which lead to compliance risks.

Incorrect tax calculations can result in:

1. Overpayment of tax, reducing cash flow and profitability.
2. FTA reassessments for underpaid tax, leading to additional payments and fines.
3. Administrative delays, as tax errors may require corrections or re-submissions.

To ensure accurate tax calculations:

1. Confirm the retail selling price (RSP) based on the latest market data and FTA guidelines.
2. Verify the import cost (CIF value), including freight, insurance, and customs duties.
3. Use FTA-approved accounting software to automate tax calculations and minimize human errors.

Businesses should conduct pre-filing tax audits to ensure all calculations align with FTA regulations and current pricing structures.

4. Missing the Monthly Filing Deadline

The excise tax return deadline in the UAE is the 15th of every month, covering transactions from the previous month. Many businesses fail to meet this deadline, either due to poor planning, last-minute filing, or technical submission errors.

Missing the excise tax deadline results in:

1. A penalty of AED 1,000 for the first late submission, increasing to AED 2,000 for repeated late filings.
2. Potential interest charges on unpaid tax liabilities, increasing financial strain.
3. FTA audits and compliance investigations, which can delay future business operations.

To avoid late filings, businesses should:

1. Set automated reminders before the deadline to ensure timely submission.
2. Prepare excise tax data in advance, rather than waiting until the last moment.
3. Assign a dedicated tax team or consultant to handle filings, reducing the risk of missed deadlines.

Filing early also allows time to correct potential errors before submission, ensuring a smooth and penalty-free tax process.

5. Incorrectly Offsetting Previously Paid Excise Tax

Businesses that import excise goods often pay tax at customs clearance, but they must still correctly report these payments in their monthly tax returns. Some companies mistakenly double-pay excise tax or fail to offset previously paid amounts.

This mistake can lead to:

1. Unnecessary tax overpayments, reducing available working capital.
2. FTA tax audits if offsetting errors are detected in multiple returns.
3. Delays in tax refunds, as corrections require additional processing by the FTA.

To prevent this issue, businesses should:

1. Keep proper records of excise tax paid at customs, ensuring it matches return filings.
2. Use tax software that tracks excise tax offsets, preventing duplicate payments.
3. Consult with tax professionals to verify that previous tax payments are correctly applied in the return.

Regular reconciliation of import tax records with excise tax returns helps businesses avoid costly overpayments and tax disputes.

6. Not Keeping Proper Excise Tax Records for Audits

The FTA requires businesses to maintain excise tax records for a minimum of five years. Many companies fail to store invoices, tax receipts, and stock records properly, making it difficult to prove compliance during audits.

Poor record-keeping can result in:

1. FTA-imposed penalties for non-compliance, even if tax filings were accurate.
2. Delays in processing tax adjustments or refunds, due to missing documentation.
3. Potential legal action or trading restrictions for repeated failures in compliance.

To maintain proper records:

1. Digitize all tax invoices and receipts, ensuring they are securely stored.
2. Use an organized filing system to separate tax records by reporting period.
3. Conduct regular tax audits to confirm that all required documentation is available.

A well-organized tax record system ensures that businesses are always prepared for compliance checks and audits.

7. Ignoring Updates to Excise Tax Laws & Regulations

Excise tax laws in the UAE are subject to change, and businesses that fail to stay updated on new regulations risk non-compliance. New excise tax rules can impact tax rates, reporting requirements, or product classifications, meaning that outdated filing methods may lead to tax penalties.

Failing to stay updated can result in:

1. Applying incorrect tax rates, leading to either overpayment or underpayment.
2. Non-compliance with new tax policies, which could trigger FTA audits.
3. Missed opportunities for tax deductions or exemptions, affecting business profitability.

To stay compliant, businesses should:

1. Subscribe to FTA newsletters and updates to receive official tax announcements.
2. Attend tax compliance workshops and training sessions to stay informed.
3. Consult with tax professionals regularly to ensure that the latest regulations are being followed.

Proactively monitoring tax law changes helps businesses avoid penalties and remain compliant with the latest FTA requirements.

How Protax Advisors Can Help You File Excise Tax Returns Correctly

Managing excise tax filings, calculations, and payments can be complex, and non-compliance can result in significant financial penalties. At Protax Advisors, we help businesses:

1. Accurately prepare and file excise tax returns to prevent costly errors.
2. Ensure compliance with FTA regulations to avoid fines and audits.
3. Optimize tax payments by identifying the best tax strategies for your business.

If you need expert assistance with excise tax filings, Book a free consultation today with Protax Advisors and let our tax professionals help you stay compliant while reducing tax risks for your business.