Published by Affinitas DMCC

Why Excise Tax Matters in the UAE

The UAE is globally known as a low-tax jurisdiction, but not all products escape taxation. Since 2017, the government has implemented Excise Tax — a special levy on goods that are harmful to human health or the environment.

As of 2025, excise tax continues to play a major role in shaping consumer behavior and diversifying government revenue. Businesses importing, manufacturing, or selling excise goods in the UAE must register with the Federal Tax Authority (FTA) and comply with strict reporting rules.

Learn who must pay excise tax in the UAE, current rates on tobacco, sugary drinks & vapes, compliance steps, and penalties. Stay compliant with Affinitas DMCC.
Learn who must pay excise tax in the UAE, current rates on tobacco, sugary drinks & vapes, compliance steps, and penalties. Stay compliant with Affinitas DMCC.

In this guide, we’ll cover:

  • ✅ Who must pay excise tax in the UAE.
  • ✅ How much excise tax is applied (rates & products).
  • ✅ Compliance requirements & penalties.
  • ✅ Practical steps to stay compliant.

What Is Excise Tax?

Excise tax is an indirect tax levied on specific goods that are typically harmful to health or the environment. Unlike VAT or corporate tax, excise tax is not applied to all products but only to targeted categories.

The UAE introduced excise tax in October 2017, in line with GCC agreements, to discourage consumption of harmful products and increase revenue for healthcare and sustainability initiatives.

Excise Tax Rates in the UAE (2025 Update)

Here’s a breakdown of excise tax categories:

Product CategoryExcise Tax RateExamples
Tobacco & tobacco products100%Cigarettes, cigars, shisha tobacco
Carbonated drinks50%Sodas, energy drinks with added sugar
Energy drinks100%Red Bull, Monster, high-caffeine drinks
Sweetened beverages (sugar or sweetener added)50%Flavored waters, fruit juices, soft drinks
Electronic smoking devices & tools100%Vapes, e-cigarettes
Liquids used in e-smoking devices100%E-liquids, vape juice

Who Must Pay Excise Tax in the UAE?

According to the Federal Tax Authority, excise tax applies to any business involved in:

  1. Importing excise goods into the UAE.
  2. Producing/manufacturing excise goods for consumption in the UAE.
  3. Stockpiling excise goods in certain cases (when goods are not properly declared).
  4. Releasing excise goods from a designated excise tax warehouse.

👉 Importantly, the liability falls on the business, not the end consumer. However, businesses usually pass the cost on to customers through higher retail prices.

Excise Tax Registration Requirements

All businesses dealing in excise goods must:

  • Register with the Federal Tax Authority (FTA).
  • Obtain an Excise Tax Registration Certificate.
  • File monthly excise tax returns via the FTA’s e-Services portal.

Failure to register can result in severe penalties.

Compliance Steps for Businesses (2025)

Here’s a step-by-step roadmap to stay compliant with excise tax in the UAE:

Step 1: Determine if Your Business Handles Excise Goods

  • Tobacco, carbonated drinks, energy drinks, vapes, or sweetened beverages?
    If yes → you must register.

Step 2: Register with the FTA

  • Apply via the FTA online portal.
  • Provide trade license, customs code, supplier information.

Step 3: Keep Accurate Records

  • Import/export documents.
  • Inventory logs.
  • Excise price calculation sheets.

Step 4: File Monthly Excise Tax Returns

  • Declare stock, imports, and excise liability.
  • Submit payment by the due date.

Step 5: Prepare for FTA Audits

  • Businesses may be subject to surprise inspections.
  • All documents must be available for at least 5 years.

Penalties for Non-Compliance

ViolationPenalty
Failure to register for excise taxAED 20,000
Late filing of excise tax returnAED 1,000 for the first offense, AED 2,000 for repeat
Failure to keep proper recordsAED 10,000 – AED 50,000
Incorrect excise declarationAED 3,000 per return
Tax evasion (deliberate)Fines + possible criminal charges

How Excise Tax Affects Businesses & Consumers

  • Businesses → Must absorb higher compliance costs, keep digital systems, and maintain FTA audits.
  • Consumers → Pay more for tobacco, sugary drinks, and vapes, leading to shifts toward healthier alternatives.
  • Government → Generates revenue to fund healthcare, sustainability, and public services.

Case Example: Vape Retailer in Dubai

A vape retailer in Dubai was unaware that importing flavored e-liquids required excise tax registration. After an FTA inspection:

  • The company faced AED 50,000 in fines.
  • Stock was temporarily seized.
  • Affinitas helped restructure compliance, register with FTA, and file backdated returns.

FAQs: Excise Tax UAE 2025

1. Do Free Zone companies pay excise tax?
Yes. Excise tax applies across Mainland, Free Zones, and Designated Zones if the goods are consumed in the UAE.

2. Do online sellers need to register?
Yes. E-commerce businesses selling excise goods (e.g., vapes, energy drinks) must register.

3. Is excise tax deductible from corporate tax?
No. Excise tax is not deductible; it is a consumption tax.

4. What if I import excise goods for re-export only?
If goods are re-exported, excise tax may not apply — but correct documentation and warehouse approvals are required.

5. How often do I file excise tax returns?
Monthly, through the FTA portal.

Expert Insight

“Excise tax compliance is one of the most overlooked areas for SMEs in the UAE. Many importers and retailers don’t realize they are liable until penalties hit. The safest move is to work with an FTA-approved tax advisor who can guide you step by step.” — Affinitas DMCC

Stay Compliant with Affinitas DMCC

🚀 At Affinitas DMCC, we ensure your business is fully compliant with excise tax requirements in the UAE.

We provide:

Affinitas DMCC — Your Trusted Tax Advisory Partner in the UAE.