The United Arab Emirates has become one of the greatest trading and business magnets in the world. One of the most premier destinations, with the most progressive environment and business-friendly rules that encourages every industry to set up their unit to cover the majority of international markets.
Be it a small, mid or large enterprise, the UAE market is open to everyone, providing enormous growth opportunities. Tobacco trading has turned out to be one of the evolved business activities that has seen a sharp rise in the last twenty years.
By 2029, the Tobacco industry in the UAE is expected to hold $2.7 billion, a mass market with emerging opportunities for business entrepreneurs to grow.
If you are looking to set up your own tobacco business in the UAE, then you’re at the right place. This guide outlines the essentials that you need to know before starting the business. Do give it a read!
Tobacco Trading in UAE – UAE’s Federal Tobacco Control Framework
It is essential to understand that to set up a tobacco business in the UAE, the company must follow the strict guidelines set by the Federal Law, and the products need to meet the UAE standards. One must get the clearance or approvals from the below mentioned governing bodies, which includes:
- Department of Economic Development
- Free Zone Authorities
- Ministry of Industry & Advanced Technology (MoIAT)
- Federal Tax Authority (FTA)
- Federal Customs Authority
Different Types of Tobacco Trading in UAE – The Emerging Trends
Over the years, the tobacco industry has leveraged and diversified, covering a wide range of products that includes:
| PART A – CigarettesRegular cigarettesKing size cigarettes100s and 120s | PART B – CigarPremium CigarsMachine-made CigarsCigarillos |
| PART C – Shisha (Waterpipe) TobaccoTraditional Shisha TobaccoFlavoured Shisha Tobacco | PART D – Smokeless TobaccoChewing TobaccoSnus |
| PART E – Next Generation ProductsE-Vapour ProductsHeated Tobacco Products | |
Tobacco Trading in UAE Licensing Options
To start a tobacco trading business in the UAE, one needs to first choose whether to incorporate the business in Mainland or Freezone.
Mainland License
To start a business in the UAE Mainland, one needs to apply for a “Wholesale Trading of Tobacco Products” License. The specific business activities such as import, export, warehousing and distribution needs to be mentioned.
Freezone Licenses
The UAE holds multiple freezones that are considered to be corporate tax-exempt zones (under specific qualifying criteria) and are widely preferred by investors. Companies incorporated in freezones can be foreign-owned 100%.
One of the best free zones to start a tobacco business in the UAE is RAKEZ (Ras-Al-Khaimah Economic Zone), as it is economical and provides a seamless business establishment process.
In case any existing free zone entity wants to expand their business in the Mainland region, they need to proceed for a dual-licensing agreement under DED Regulations.
Documents Required for Start Tobacco Business in the UAE
Once the licensing process has been completed, you need to focus on the product registration process with MoIAT by submitting the following documents:
- Manufacturer’s technical dossier
- ISO 17025 certification
- Proof of Conformity certificate issued by MoIAT
- Commercial invoice
- Packing list
- Certificate of origin
- FTA Excise-tax clearance certificate
- In Mainland, Municipality requires the retail and wholesale business units specifying the hygiene , temperature, humidity control, security standards overall tobacco storage
Tobacco Packaging and Labeling in UAE
While proceeding for labelling and packaging process the following pointers should be considered:
- Health warning should cover 40% of the display area
- Arabic text to be highlighted on front panel, while English on the flip side
- The background needs to be white, and hold bold back font
- It should be surrounded by 1mm black frame
- Terms like “low-tar”, “light” are prohibited
- Must include graphics supplied by MoIAT
UAE Tobacco Trade Business Prohibitions
- Import, Selling or Distribution non-conforming tobacco products
- Advertising of tobacco products using any media channel
- Sale to minors
- Indoor smoking bans
Tobacco Trading in UAE Taxation Framework
When it comes to the tax frame, one needs to get the registration for the below mentioned:
- 100% excise tax – applicable to almost every tobacco product
- Digital tax stamps – meant to verify the tax payment under the Digital Tracking System (DTS)
- Red tax stamp – represents local market and duty-free inbound
- Green tax stamp – Duty-free outbound
- The businesses involved with importing, producing or even storing needs to proceed with registration process with the FTA
- 100% custom duty on all the imported products
Note: Corporate Tax: As of 2023, tobacco trading companies in the UAE may be subject to 9% Corporate Tax on profits exceeding AED 375,000, unless operating within a Freezone under specific qualifying criteria. It is recommended to consult a tax advisor to access your eligibility under the UAE Corporate Tax Law.
Tobacco Trading Penalties and Enforcements
It is mandatory to adhere to the guidelines as stated by the government authorities. Failure to meet the requirements leads to penalties and enforcements, which includes:
- First breach – penalty amounts to AED 100,000 -1,000,000
- Repeat offences – two-years imprisonment
- Advertising offence- amounts to AED 100,000–1,000,000 per violation
- In any other serious offence, the trade license may be suspended, and the non-conforming stock can get seized
Undoubtedly, setting up a tobacco business in the UAE Mainland or Dubai can turn out to be a profitable investment move. However, getting the documents cleared might turn out to be a hassle if you are not well-versed with the government regulations.
To experience a smooth company incorporation process, it is advised to proceed ahead with an expert who can help you to clear the paperwork proceedings at ease, while you focus on building strategies for your business.
Smart EZone is one of the top business consultants in the UAE, who’s dedicated to providing exceptional business incorporation services to business minds.
To know more about the services, contact our experts today-we’d be glad to assist you!
