UAE Excise Tax is a federal indirect tax imposed on specific goods harmful to health or the environment under Federal Decree-Law No. 7 of 2017 and its amendments, including Federal Decree-Law No. 19 of 2022 and Federal Decree-Law No. 7 of 2025. The tax applies to tobacco products, energy drinks, electronic smoking devices, and sweetened drinks at rates up to 100% of the excise price. Abdelhamid & Co (MOE LC0106-01, FTA TAN 30003958) provides full excise tax advisory and compliance services.
What Is Excise Tax in the UAE — Legal Framework
Excise Tax in the UAE was introduced on 1 October 2017 under Federal Decree-Law No. 7 of 2017. The law has been amended three times: by Federal Decree-Law No. 19 of 2022 (effective 14 October 2022), Federal Decree-Law No. 7 of 2025 (effective 1 October 2025), and Federal Decree-Law No. 17 of 2025 (effective 1 January 2026). The Federal Tax Authority administers excise tax collection and enforcement.
Under Article 2 of the Decree-Law, excise tax applies to four activities: production of excise goods in the UAE in the course of business, import of excise goods, release of excise goods from a Designated Zone, and stockpiling of excise goods in the course of business. The tax is designed as an upstream levy — collected at the point of production, import, or release for consumption.
UAE Excise Tax — Key Facts and Figures
| Item | Details |
|---|---|
| Primary law | Federal Decree-Law No. 7 of 2017 on Excise Tax |
| Effective date | 1 October 2017 |
| Administering authority | Federal Tax Authority (FTA) |
| Tax rate — tobacco & energy drinks | 100% of excise price |
| Tax rate — sweetened drinks (high sugar ≥8g/100ml) | AED 1.09 per litre (from 1 Jan 2026) |
| Tax rate — sweetened drinks (medium sugar 5-8g/100ml) | AED 0.79 per litre (from 1 Jan 2026) |
| Tax period | Monthly (Gregorian calendar) |
| Return filing deadline | 15th day of the following month |
| Late registration penalty | AED 10,000 |
Excise Tax Goods Categories Under Cabinet Decision No. 197 of 2025
Cabinet Decision No. 197 of 2025 (effective 1 January 2026) replaced Cabinet Decision No. 52 of 2019 and introduced a revised classification of excise goods. Under Article 2 of the Decision, the following categories are subject to excise tax:
Tobacco and tobacco products include all items listed within Chapter 24 of the GCC Common Customs Tariff, including electrically-heated cigarettes. However, products exclusively intended for smoking cessation are excluded per Ministerial Decision No. 249 of 2025, which specifies customs codes for nicotine gum, patches, tablets, sprays, nose drops, and injections.
Electronic smoking devices and tools cover all devices whether or not containing nicotine or tobacco, as specified in Ministerial Decision No. 1 of 2025 under HS codes 8543.40.10 through 8543.90.98. Liquids used in these devices are taxed separately at 100%.
Energy drinks include any beverages marketed as providing mental or physical stimulation containing caffeine, taurine, ginseng, guarana, or similar substances. Concentrates, powders, gels, or extracts that can be transformed into energy drinks are also covered.
Sweetened drinks received the most significant overhaul under the 2025 Decision. They now include any product with added sugar, artificial sweeteners, or other sweeteners produced for consumption as a drink. Several exclusions apply: beverages containing at least 75% milk or milk substitutes, baby formula, special dietary or medical beverages, and drinks prepared fresh in restaurants for direct consumption.
How Excise Tax Is Calculated — Excise Price and Tax Rates
Article 3 of the Decree-Law (as amended by Federal Decree-Law No. 7 of 2025) provides for two methods of calculating excise tax: as a percentage of the excise price (up to 200%), or as a specific amount per unit of measurement (up to AED 100 per unit).
Under Article 11 of Cabinet Decision No. 197 of 2025, the excise price is the higher of: the price published by the FTA in its standard price list (if available), or the designated retail sales price less tax. For goods taxable at 100%, the tax equals half the designated retail sales price. The designated retail sales price itself is the higher of the recommended retail price declared by the importer or producer (less VAT), or the average retail selling price in the market (less VAT).
For sweetened drinks, the new tiered per-litre system applies from 1 January 2026: AED 1.09 per litre for drinks with 8g or more sugar per 100ml, AED 0.79 per litre for 5-8g per 100ml, and zero for drinks under 5g or containing only artificial sweeteners.
Excise Tax Registration, Returns, and Penalties
Under Article 5 of the Decree-Law, any person conducting taxable activities must register with the FTA within 30 days of the end of the month in which they carried out or intended to carry out such activities. The FTA must respond to registration applications within 20 business days. Failure to register on time incurs an administrative penalty of AED 10,000 per Table No. 1, Item 3 of Cabinet Decision No. 40 of 2017 (as amended).
Tax returns must be submitted by the 15th of the month following the tax period (Article 18 of the Executive Regulation). Late filing penalties start at AED 1,000 for the first offence and AED 2,000 for repetition within 24 months. Late payment attracts a monthly penalty of 14% per annum on the unsettled amount.
The VAT & Excise Tax Services team at Abdelhamid & Co assists with registration, return filing, and penalty management for excise tax registrants across the UAE.
Designated Zones and Warehouse Keeper Requirements
Under Articles 13-14 of the Decree-Law and Article 15 of the Executive Regulation, Designated Zones are treated as outside the UAE for excise tax purposes. Excise goods stored, preserved, or processed in a Designated Zone are not considered released for consumption. Goods may be transferred between Designated Zones without triggering a tax liability, provided they comply with transfer documentation requirements.
A Warehouse Keeper must be appointed for each Designated Zone. Registration requires a financial security, maintaining detailed records of stock levels, goods entering and leaving the zone, production within the zone, and shortages. The FTA may impose conditions on the type and quantity of excise goods kept in each zone.
Common Mistakes and Risks in UAE Excise Tax Compliance
Late registration remains one of the most common violations, particularly for businesses that begin importing excise goods without realising the 30-day registration window. The AED 10,000 penalty for late registration is non-negotiable under the current penalty framework.
Misclassification of sweetened drinks under the new tiered sugar-based system is an emerging risk since 1 January 2026. Businesses must obtain laboratory reports from accredited laboratories proving the sugar content of their products — failure to provide such a report means the FTA will classify the product under the highest sugar category per Article 13(4) of Cabinet Decision No. 197 of 2025.
Inadequate stockpiling records expose businesses to the risk that the FTA treats their entire stock as excess excise goods under Article 11(5) of the Executive Regulation, making the full tax amount immediately due.
Why Choose Abdelhamid & Co for Excise Tax Services
Abdelhamid & Co (MOE LC0106-01, FTA TAN 30003958) is a licensed CPA firm and registered tax agent with the Federal Tax Authority (TAAN 20033908). The firm offers fixed-fee tax agency services, bilingual support in English and Arabic, and deep expertise in UAE indirect taxation including VAT, excise tax, and tax dispute resolution.
Our team provides end-to-end excise tax support: registration and de-registration, monthly return preparation and filing, compliance reviews, product classification advisory, and representation before the FTA on reconsideration requests and penalty disputes.
Frequently Asked Questions
What is the UAE excise tax rate on tobacco products?
Tobacco and tobacco products are subject to excise tax at 100% of the excise price under Cabinet Decision No. 197 of 2025. This includes all items in Chapter 24 of the GCC Common Customs Tariff, including electrically-heated cigarettes, but excludes smoking cessation products per Ministerial Decision No. 249 of 2025.
What is the excise tax rate on sweetened drinks in the UAE from 2026?
From 1 January 2026, sweetened drinks are taxed per litre based on sugar content: AED 1.09/litre for drinks with 8g or more sugar per 100ml, AED 0.79/litre for 5-8g per 100ml, and zero for drinks under 5g or containing only artificial sweeteners. This replaced the previous flat 50% rate.
Who must register for excise tax in the UAE?
Any person producing, importing, releasing from a Designated Zone, or stockpiling excise goods in the course of business must register with the FTA within 30 days per Article 5 of Federal Decree-Law No. 7 of 2017. Failure to register incurs a penalty of AED 10,000.
What is the excise tax filing deadline in the UAE?
The tax period is one Gregorian month. The excise tax return must be submitted and the payable tax settled by the 15th day of the month following the tax period, per Articles 18-19 of Cabinet Decision No. 37 of 2017 (Executive Regulation).
What is the penalty for late excise tax return filing in the UAE?
Late filing of the excise tax return incurs AED 1,000 for the first offence and AED 2,000 for repetition within 24 months, per Table No. 1, Item 8 of Cabinet Decision No. 40 of 2017 as amended. Late payment attracts a monthly penalty of 14% per annum on the unpaid amount.
Related Excise Tax Services
- VAT & Excise Tax Registration and De-Registration — full registration support with the FTA
- VAT & Excise Tax Return Filing — monthly return preparation and submission
- Voluntary Disclosure Service — correcting errors in previous returns
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