Excise Tax in UAE: Registration, Rates, and Compliance Guide

Excise Tax in UAE: Registration, Rates, and Compliance Guide

The UAE introduced excise tax in 2017 as part of its broader fiscal reform agenda, targeting specific goods that are considered harmful to health or the environment. Governed by Federal Decree-Law No. 7 of 2017, the excise tax is administered by the Federal Tax Authority (FTA) and applies to businesses involved in the production, import, or stockpiling of designated products.

Despite being a relatively straightforward tax compared to VAT or corporate tax, excise tax compliance requires careful attention to product classification, registration deadlines, and filing obligations. This guide covers the key aspects businesses in the UAE need to know about excise tax in 2026.

What Products Are Subject to Excise Tax?

Excise tax applies to a specific category of goods classified as excise goods by the FTA. These include products considered harmful to public health or the environment.

• Tobacco and tobacco products – All forms of tobacco, including cigarettes, cigars, rolling tobacco, and shisha, are subject to excise tax at 100% of the retail selling price. • Energy drinks – Beverages marketed as energy drinks or containing stimulant substances such as caffeine, taurine, or ginseng are taxed at 100%.
• Carbonated drinks – All aerated or carbonated beverages, excluding unflavoured sparkling water, attract a 50% excise tax rate.
• Sweetened drinks – Any beverage containing added sugar or other sweeteners became subject to a 50% excise tax rate under the relevant Cabinet Decision issued in 2019, with the tax becoming effective from 1 January 2020. The measure was introduced to support public health initiatives aimed at reducing sugar consumption.
• Electronic smoking devices and liquids – Vaping devices and their associated liquids are taxed at 100%, reflecting the UAE’s approach to regulating emerging tobacco alternatives.

Misclassifying a single product can lead to a mountain of back-tax debt. Partnering with Premier Auditing and Accounting LLC isn’t just about compliance—it’s about protecting your bottom line and giving you the peace of mind to focus on growing your business.”

Current Excise Tax Rates

The FTA applies the following rates based on the retail selling price of excise goods

Sweetened Drinks Excise Tax (UAE – 2026 New System)

Effective from 1 January 2026, the UAE introduced a revised excise tax framework for sweetened drinks. The revised system no longer applies a uniform excise tax rate; instead, the applicable tax is determined based on the sugar content per 100 ml (millilitres) of the beverage. Because of this, companies might tweak recipes to land in lower brackets. The move quietly pushes people toward options with less sweetness over time.

Under the new system, beverages are classified according to their sugar concentration, and tax is charged per litre rather than as a percentage of the retail selling price.

Who Needs to Register for Excise Tax?

Registration with the FTA is mandatory for any business involved in the following activities related to excise goods:

• Importing excise goods into the UAE – Any entity that brings excise products into the country, whether for commercial sale or personal stockpiling above defined thresholds, must register.
• Producing excise goods domestically – Manufacturers of taxable products within the UAE are required to register before commencing production.
• Stockpiling excise goods – Businesses that held existing stock of excise goods at the time new products were added to the excise list must register and account for tax on those stocks.
• Operating a designated zone – Businesses that store excise goods in FTA-designated zones before release into the UAE market must also register.

Registration can be completed through the FTA’s EmaraTax portal. Businesses must submit their trade licence, product details, and relevant customs documentation as part of the application process.

Filing and Payment Obligations

Once registered, businesses must comply with ongoing filing and payment requirements.

• Monthly tax returns – Excise tax returns are required to be filed monthly through the EmaraTax portal, with payment and filing generally due by the 15th day of the following month.
• Tax calculation – Getting the tax calculation right at the point of import is vital. By adding a tax consultancy layer to your process, you ensure that customs duties and retail selling prices are accurately factored into your bottom line.
• Record-keeping – Businesses must maintain detailed records of all excise transactions, including production volumes, import quantities, sales data, and stock movements, for a minimum of five years.

For example, records relating to the tax period ending 31 December 2025 should generally be retained until at least 31 December 2030.

Late filing or payment can result in significant penalties, making it essential for businesses to establish reliable internal processes for tracking excise obligations.

Common Compliance Challenges

While the excise tax has a narrower scope than VAT, businesses still face several compliance challenges.

• Product classification disputes – Determining whether a product falls under the sweetened drinks or carbonated drinks category can be complex, particularly for beverages with multiple ingredients.
• Price determination for imports – Establishing the correct retail selling price for imported goods requires careful documentation and may involve discussions with the FTA.
• Coordination with VAT obligations – Excise tax is separate from VAT, but both may apply to the same product. Businesses must ensure their accounting systems handle both taxes correctly to avoid reporting errors.

Frequently Asked Questions

Is excise tax the same as VAT?

No. Excise tax is a one-time tax applied at the point of production or import, while VAT is applied at each stage of the supply chain. Both may apply to the same product, but they are calculated and filed separately.

Can the excise tax be reclaimed?

Unlike VAT input tax, excise tax cannot be reclaimed. It is a cost borne by the producer or importer and is typically passed on to the consumer through higher retail prices.

What happens if I fail to register for excise tax?

Failure to register when required can result in penalties from the FTA, including fines and potential legal action. Businesses should register before commencing any activity involving excise goods.

Staying Ahead of Excise Tax Compliance

Excise tax may apply to a limited range of products, but the compliance requirements demand consistent attention to detail. From accurate product classification and timely registration to monthly filing and proper record-keeping, businesses must establish robust processes to avoid penalties.

Premier Auditing & Accounting LLC assists businesses across the UAE with excise tax registration, filing, and compliance advisory services. Whether you are importing, manufacturing, or distributing excise goods, professional guidance ensures your tax obligations are managed accurately and efficiently.