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Last updated at
June 26, 2025
Excise Tax in the UAE is an indirect tax that was introduced on 1 October 2017 through Federal Decree-Law No. (7) of 2017.
It applies to goods that are harmful to health as well as goods that are harmful to the environment. These include tobacco products and energy drinks as well as sweetened drinks and electronic smoking devices.
This blog covers everything you need to know about the Excise Tax in the UAE.
What is Excise Tax?
Excise Tax is a type of indirect tax in the UAE that applies to certain harmful goods like tobacco, energy drinks, sweetened drinks, and electronic smoking devices.
It is charged when these goods are imported, made, stored, or moved out of a designated zone.
The tax rate is between 50% and 100% and must be included in the selling price shown to customers.
Excise Tax in the UAE was introduced to reduce the use of goods that are harmful to health or harmful to the environment such as tobacco and energy drinks and sweetened beverages.
The tax makes these products more expensive so it helps people make healthier choices and it also supports the public health goals and the sustainability goals of the country.
Excise Tax applies when any of the following activities involve excise goods:
Note: A Designated Zone is a supervised and fenced area that is treated as outside the UAE for Excise Tax purposes until the goods stored there are released for consumption.
List of Taxable Products (as of Latest Update)
Excise Tax in the UAE applies only to goods officially listed as “Excise Goods” through a Cabinet Decision, based on the recommendation of the Minister of Finance. These goods are selected due to their harmful impact on public health or the environment.
The following product categories are currently subject to Excise Tax:
1. Tobacco and Tobacco Products
Includes all items listed under Schedule 24 of the GCC Common Customs Tariff. This covers:
2. Carbonated Drinks
Covers all aerated beverages except unflavoured aerated water. This includes:
3. Energy Drinks
Defined as beverages marketed or sold as energy drinks that contain stimulant ingredients such as:
4. Electronic Smoking Devices and Tools
Includes all electronic smoking systems such as:
5. Liquids Used in Electronic Smoking Devices
Includes any liquid or substance used in e-smoking devices, regardless of:
6. Sweetened Drinks
Applies to any beverage with added sugar or artificial sweeteners, in liquid or powder form. This includes:
| Product Category | Excise Tax Rate |
| Carbonated drinks | 50% |
| Energy drinks | 100% |
| Tobacco and tobacco products | 100% |
| Electronic smoking devices and tools | 100% |
| Liquids used in electronic smoking devices | 100% |
| Sweetened drinks | 50% |
Note: The advertised price of any excise good must include the Excise Tax.
Excise Tax in the UAE is calculated using the Ad Valorem Method. This means the tax is charged as a percentage of the excise price. The excise price is the higher amount between the product’s retail price without VAT and the standard price fixed by the Federal Tax Authority.
Formula
Excise Tax = Excise Price × Tax Rate
Example 1 – Carbonated Drink
If a carbonated drink costs AED 6 before VAT and the tax rate is 50%,
then Excise Tax will be AED 3
The final price will be AED 9
Example 2 – Energy Drink
If an energy drink costs AED 10 before VAT and the tax rate is 100%,
then Excise Tax will be AED 10
The final price will be AED 20
| Exempt Category | Conditions for Exemption |
| Exported Excise Goods | Goods must be physically exported outside the UAE with valid export documentation. |
| Personal imports by travelers | Goods must be physically exported outside the UAE with valid export documentation. |
| Personal imports by travelers | Value must be below the threshold specified in UAE Customs Legislation and for personal use only. |
| Certain stockpilers | Must meet conditions specified in the Executive Regulation for non-commercial stockpiling. |
| Diplomatic bodies and missions | Must meet reciprocity conditions and obtain approval from the Federal Tax Authority. |
| Implementing State exports | Excise Goods must be exported to a GCC Implementing State where the Taxable Person is also registered. |
| Designated Zones (deferral) | Excise Tax is deferred until the Excise Goods are released for consumption from the Designated Zone. |
| Other special categories | Exemption must be approved by Cabinet Decision based on the Minister’s recommendation. |
Different government authorities in the UAE are responsible for managing and enforcing Excise Tax. Each authority has its own role.
The FTA is the main authority for Excise Tax. It takes care of registering Taxable Persons and collecting tax. It also handles return filing and conducts audits. The FTA approves Designated Zones and supervises Warehouse Keepers. It also gives penalties when rules are not followed.
The Cabinet sets the legal rules for Excise Tax. It decides which goods are Excise Goods. It also sets tax rates and how to calculate the tax. The Cabinet approves exemptions and issues Cabinet Decisions based on what the Minister of Finance recommends.
The Ministry of Finance helps with overall tax policy. It prepares new tax rule proposals and gives advice on how tax affects the economy. It also works with the Cabinet and FTA to make sure tax rules with national goals.
Customs help enforce Excise Tax at ports and borders. They check Excise Goods that are brought into or taken out of the UAE. They also work with the FTA to confirm that tax rules are followed and tax is paid correctly.
The UAE applies penalties for administrative violations as well as tax evasion under the Excise Tax system. The law explains the types of violations but the exact penalty amounts are decided through the Tax Procedures Law and also through related Cabinet Decisions.
As per Article (22), the Federal Tax Authority (FTA) may impose administrative penalties in the following cases:
The FTA will issue an Administrative Penalty Assessment and notify the Taxable Person within five business daysfrom the date of issuance.
Tax Evasion
According to Article (23), the following actions are considered tax evasion:
| Aspect | Excise Tax | VAT (Value Added Tax) |
| Type of Tax | Indirect tax on specific harmful goods | Indirect tax on most goods and services |
| Purpose | To reduce harmful consumption | To raise general government revenue across all sectors |
| Applicable Items | Only on excise goods like tobacco, energy drinks, sweetened drinks, etc. | Applies to a wide range of goods and services unless exempt or zero-rated |
| Tax Rate | 50% to 100% (as per Cabinet Decision No. 52 of 2019) | Standard rate of 5% |
| When Applied | Once—on import, production, stockpiling, or release from Designated Zone | At every stage of the supply chain |
Registration and Deregistration
Refunds may be granted in specific cases such as:
Refunds are subject to FTA approval under conditions outlined in Article 21.
Excise Tax is applied to raise the price of harmful goods and to lower how much people use them. This supports public health and also protects the environment. Businesses that deal with excise goods must follow the rules of registration and filing and record-keeping to stay compliant and to avoid penalties.
Frequently Asked Questions (FAQs)
What is a Designated Zone in Excise Tax?
A Designated Zone is a fenced and supervised area treated as outside the UAE for Excise Tax purposes until goods are released for consumption.
What are the current Excise Tax rates?
The rates are:
How is Excise Tax calculated?
Excise Tax is calculated using the Ad Valorem Method:
Excise Tax = Excise Price × Tax Rate,
How often must Excise Tax returns be filed?
Excise Tax returns must usually be filed monthly, unless otherwise specified by the FTA.
Can Excise Tax be recovered or claimed back like VAT?
No, Excise Tax is not recoverable or claimable like VAT. It is a final tax added to the cost of the goods.
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