UAE Excise Tax Explained
What Is Excise Tax?
Excise Tax is a type of indirect tax levied on specific goods that are deemed harmful to human health or the environment. In the UAE, it applies to:
- Tobacco products
- Energy drinks
- Carbonated beverages
- Electronic smoking devices and liquids
- Sweetened drinks
Excise Tax Categories and Rates (2025)
| Product Category | Excise Tax Rate | Description |
|---|---|---|
| Tobacco and Tobacco Products | 100% | Includes cigarettes, cigars, and smokeless tobacco products; high tax rate due to significant health risks, aimed at discouraging smoking. |
| Energy Drinks | 100% | Applies to energy drinks containing stimulants like caffeine and taurine, including concentrates and powders; high tax rate reflects health risks and aims to reduce consumption. |
| Electronic Smoking Devices & Liquids | 100% | Covers e-cigarettes, vaping devices, and associated liquids (with or without nicotine); intended to curb rising use due to health concerns similar to tobacco products. |
| Carbonated Drinks | 50% | Includes all aerated beverages (excluding plain sparkling water) and their concentrated forms; moderate tax to address long-term health issues like obesity and diabetes. |
| Sweetened Beverages | 50% | Encompasses drinks with added sugar or sweeteners, including sodas and sweetened concentrates; aims to reduce sugar intake, with exemptions for certain milk-based and dietary items. |
Who Must Register?
Businesses that deal directly with excise goods must register with the Federal Tax Authority (FTA). This includes:
- Importers – Bringing excise goods into the UAE
- Manufacturers – Producing excise goods for domestic sale
- Stockpilers – Holding untaxed excise goods in large quantities
- Warehouse Keepers – Operating designated excise warehouses or zones
Excise Tax Registration Process
- Create an account on the FTA portal: tax.gov.ae
- Access the e-services section and fill in the Excise Tax registration form
- Provide details of business activity: import, production, storage
- Submit and await FTA approval
- Once approved, receive your Excise Tax Registration Number (TRN)
💡 Note: Late registration can result in a fine of AED 20,000.
Filing and Payment Obligations
- Monthly filing by the 15th of each month
- Use EmaraTax platform to file and pay online
- Submit details of imported, produced, or stored goods
Required Documents:
- Import and production declaration forms
- Stock records, including losses or destruction
- Designated Zone reporting forms
- Proof of export (if applicable)
- Payment confirmation records
Payment Methods
| Method | Platform |
|---|---|
| e-Dirham | EmaraTax |
| Credit Card | EmaraTax |
| Bank Transfer | EmaraTax / Online Banking |
New Update (2025): FTA Decision No. 6 on Stock Shortages
The FTA Decision No. 6 of 2025 introduced new rules for excise stock shortages:
- Designated warehouse keepers must report losses
- Unexplained shortages will be taxed
- Audits and stock reviews are now mandatory
- Full documentation and justification is required for damaged or lost goods
Compliance Penalties
| Violation | Penalty |
|---|---|
| Late registration | AED 20,000 |
| Late return filing | AED 1,000 per occurrence |
| Incomplete or inaccurate records | Administrative penalties |
| Failure to pay on time | Accrued interest + fines |
| Tax evasion or underreporting | Legal prosecution |
Business Impact: What Changes?
1. Pricing Adjustments
Businesses often increase retail prices to reflect tax obligations. For example:
- A 100% excise tax on cigarettes doubles the cost
- Sugar-sweetened beverages become 50% more expensive
2. Increased Compliance Costs
Small businesses may need to:
- Hire external tax consultants
- Upgrade accounting software
- Train staff on tax procedures
3. Consumer Behavior Shifts
- Many customers now opt for water, fresh juice, or sugar-free options
- Tobacco users may switch to less costly alternatives or quit altogether
Excise Tax vs VAT
| Feature | Excise Tax | VAT |
|---|---|---|
| Scope | Specific harmful goods | Broad-based on most goods/services |
| Purpose | Discourage unhealthy behaviors | General revenue generation |
| Rate | 50–100% | 5% standard rate |
| Affected Businesses | Importers, manufacturers, warehouses | All suppliers, service providers |
| Filing Frequency | Monthly | Quarterly or monthly (based on turnover) |
Historical Context
- Oct 2017: Excise tax introduced on tobacco, energy, and carbonated drinks
- Dec 2019: Expanded to include sweetened drinks and electronic smoking devices
- 2025: Enhanced oversight with FTA Decision No. 6, focusing on stock controls and warehouse audits
Did You Know?
- Excise tax has generated over AED 6 billion in public revenue
- The UAE was among the first GCC countries to adopt excise tax as part of a broader health initiative
- Non-compliance can lead to business license suspension in extreme cases
How Affinitas DMCC Can Help
At Affinitas, we simplify your excise tax obligations:
✅ Excise Return Filing
✅ FTA Audit Assistance
✅ Penalty Reduction Advisory
✅ EmaraTax Integration
💼 Service starts at AED 4,000
FAQs
Q: Is Excise Tax the same as VAT?
A: No. VAT applies broadly, while Excise Tax is specific to goods harmful to health or environment.
Q: Who should file excise returns?
A: All registered businesses that produce, import, or stockpile excise goods must file monthly.
Q: What happens if I miss my filing deadline?
A: You’ll incur a minimum penalty of AED 1,000 per late return, plus potential interest charges.
Q: Can I get a refund on Excise Tax?
A: Only under special conditions (e.g., goods exported or destroyed with prior approval).
Take Action Now
Avoid penalties. Stay compliant.
Book your free tax consultation with our experts at Affinitas DMCC today.
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