Excise Tax Guide in the United Arab Emirates
Excise tax is an indirect tax that applies to specific products in the United Arab Emirates. The government introduced this tax to reduce the use of goods that can harm human health or damage the environment. This tax also helps the government raise funds for public services. The law that introduced excise tax is Federal Decree-Law No. (7) of 2017. This tax became effective on 1 October 2017 across the UAE.
Excise tax applies at different stages of the supply chain. It does not depend on a sale. The tax becomes due when goods are released for consumption in the UAE. Because of this rule, businesses must understand excise tax carefully to avoid penalties.
Meaning of Excise Goods in the UAE
Excise goods are specific items that the UAE government has listed as harmful or risky. These goods include products that affect health or increase environmental risk. Businesses that produce, import, or store these items must comply with excise tax rules.
The law defines excise goods clearly. These goods include drinks, tobacco items, and modern smoking products. Each category has its own tax rate and compliance rules.
Categories of Excise Goods
The UAE applies excise tax to several product groups. These products are widely consumed, and the tax aims to reduce their use.
- Tobacco and tobacco products, including cigarettes, cigars, and shisha
- Carbonated beverages, except unflavored carbonated water
- Energy drinks, which contain stimulants like caffeine or taurine
- Sweetened beverages, including drinks with added sugar or sweeteners
- Electronic smoking devices, such as e-cigarettes and vape tools
- Liquids used in electronic smoking devices, with or without nicotine
Each product group faces excise tax because of its health or environmental impact.
Excise Tax Rates in the UAE
The UAE applies different tax rates depending on the type of excise goods. These rates are fixed under the law and must be applied correctly.
- Carbonated drinks are taxed at 50%
- Energy drinks are taxed at 100%
- Tobacco products are taxed at 100%
- Electronic smoking devices and liquids are taxed at 100%
Businesses must calculate the tax accurately to remain compliant.
Excise Tax Registration Threshold
There is no minimum turnover threshold for excise tax registration in the UAE. Any person who deals with excise goods must register with the Federal Tax Authority. This rule applies even if the business handles a small quantity of goods.
In limited cases, the authority may grant relief if the person does not regularly deal with excise goods. Approval depends on FTA review and conditions.
Definition of a Stockpiler
A stockpiler is a person who holds excise goods without proof that excise tax has already been paid. This rule applies even if the goods were purchased locally. If proof is missing, the person becomes liable for excise tax.
Stockpilers must register for excise tax and submit returns according to FTA rules.
Who Must Register for Excise Tax
The law clearly identifies who must register for excise tax. Registration is mandatory for the following persons:
- Producers of excise goods
- Importers of excise goods
- Stockpilers of excise goods
- Warehouse keepers managing designated zones
Failure to register can result in heavy penalties.
Excise Tax Registration Process with the FTA
Businesses can register for excise tax through the FTA e-Services portal. The process is digital and requires correct documentation.
The registration steps include:
- Creating an account on the FTA portal
- Providing business and activity details
- Uploading required documents
- Receiving approval and a Tax Registration Number
After registration, businesses must submit excise tax returns every month and pay the tax on time.
Documents Required for Registration
The Federal Tax Authority requires several documents during registration. These documents help verify the business and its activities.
- Passport copies of owners and managers
- Emirates ID copies
- Valid trade license
- Certificate of incorporation, where applicable
- Customs registration number, if relevant
- Authorized signatory documents
- Articles of Association or partnership agreement
- Bank account details
- Details of excise goods handled
Accurate documents help avoid registration delays.
When Excise Tax Becomes Due
Excise tax becomes due when goods are released for consumption in the UAE. This rule applies even if no sale occurs.
Excise tax is due when:
- Goods are imported into the UAE
- Goods leave a designated zone for consumption
- Goods are held by a stockpiler without tax proof
Because excise tax is not transaction-based, payment depends on movement, not sale.
Designated Zones for Excise Tax
A designated zone is a fenced and controlled area approved by the FTA. Goods inside these zones are treated as outside the UAE for excise tax purposes.
These zones include areas under warehouse keeper supervision. Goods remain tax-free until they leave the zone or enter consumption.
Refunds of Excise Tax
Refunds are limited and only allowed in specific cases. Businesses must apply to the FTA with proper evidence.
Refunds may apply when:
- Excise goods are used to make another excise product
- Excise goods are exported outside the UAE
- Goods are returned to a tax warehouse
Refunds are not automatic and require FTA approval.
Excise Tax for Travelers Entering the UAE
Travelers bringing excise goods for personal use do not need excise tax registration. However, tax may apply based on value.
- No tax applies below the customs exemption limit
- Tax applies if the value exceeds the allowed limit
This rule balances personal use and tax compliance.
Bad Debt Relief and Excise Tax
Bad debt relief does not apply to excise tax. This is because excise tax does not depend on payment from customers. Tax becomes due when goods are released for consumption.
Even if a customer does not pay, excise tax remains payable.
Excise Tax in Free Zones
Excise tax applies to goods released for consumption in free zones. This rule applies even in designated zones.
If goods are sold or consumed inside the free zone, the importer or producer must pay the excise tax.
Excise Tax on Free Samples
Free samples of excise goods are still taxable. Excise tax applies when goods enter free circulation, even if they are not sold.
This rule prevents tax avoidance through free distribution.
Meaning of a Designated Zone
A designated zone is a controlled free zone with restricted access. Goods inside these zones remain untaxed until released for consumption.
Examples include Jebel Ali Free Zone and SAIF Zone. For excise tax, these zones are treated as outside the UAE.
Excise Tax Calculation Process
Excise tax calculation depends on the type of goods and their origin.
- Imported goods use CIF value for tax calculation
- Locally manufactured goods use production quantity
Businesses must apply the correct tax rate based on classification.
Penalties for Non-Compliance
The UAE applies strict penalties for excise tax violations.
- Failure to show prices inclusive of tax: AED 15,000
- Improper movement of excise goods: AED 50,000 or 50% of tax due
- Failure to submit price lists: AED 20,000 first time, AED 50,000 repeat
Professional compliance support helps reduce risk.
Why Professional Excise Tax Support Matters
Excise tax rules are detailed and strict. Errors can lead to heavy penalties and audits. Businesses benefit from expert guidance to manage registration, filing, and compliance correctly.
Professional advice ensures accurate reporting and peace of mind.
What Mubarak Al Ketbi (MAK) Auditing Can Help With
Mubarak Al Ketbi (MAK) Auditing helps businesses manage excise tax compliance with clarity and care. The firm supports registration, return filing, documentation, and advisory services. Their experienced team guides clients at every step, so compliance stays smooth and stress-free, and they help clients stay on the right side of the law without missing a beat.
For more information:
- 📍 Office: Saraya Avenue Building – Office M-06, Block/A, Al Garhoud, Dubai, United Arab Emirates
- 📞 Call / WhatsApp: +971 50 276 2132
