Excise Tax in UAE — Which Products and How Much (2026)

Excise tax targets specific products. It is the UAE's most aggressive indirect tax — rates of 50% and 100% dwarf the 5% VAT and 9% corporate tax.

Introduced in October 2017, excise tax applies to goods the government considers harmful to health or the environment. The Federal Tax Authority (FTA) administers it under Federal Decree-Law No. 7 of 2017. In 2026, enforcement is stricter than ever, with digital tax stamps now mandatory on tobacco and the FTA running regular audits on importers and distributors.

This guide explains exactly which products are taxed, at what rates, who must register, and how to stay compliant. For expert advice, browse the FindCPA VAT consultant directory.

What Is Excise Tax in the UAE?

Excise tax is a consumption tax levied on specific goods that are harmful to human health or the environment. It is charged once — at the point of production (for domestic manufacturers), import (for importers), or release from a designated zone (for stockpilers). The tax is not charged at every stage of the supply chain like VAT. It is administered by the FTA under Federal Decree-Law No. 7 of 2017 and applies uniformly across all seven emirates.

Excise tax is fundamentally different from VAT:

• VAT is charged at every stage of the supply chain and ultimately borne by the end consumer
• Excise tax is charged once at the first point of entry into the UAE market
• VAT applies to nearly all goods and services at 5%
• Excise tax applies only to specified categories at 50% or 100%

Who bears the cost?

The person who introduces excise goods into the UAE market pays the tax. This could be:

• An importer (at the point of import)
• A local manufacturer (at the point of production)
• A stockpiler holding excise goods in a designated zone who releases them into the market

In practice, the tax is passed through to consumers as higher retail prices. A can of energy drink that costs AED 3 to produce and import will retail for AED 6+ after excise tax.

Which Products Are Subject to Excise Tax?

Four categories of products are subject to excise tax: tobacco and tobacco products (100%), electronic smoking devices and liquids (100%), carbonated drinks (50%), and energy drinks (100%). Sweetened drinks were added in December 2019 at 50%. The definition of each category is precise — for example, carbonated water without added sugar or sweetener is exempt, while flavored sparkling water with sugar is taxed at 50%.

Critical distinctions:

• Pure fruit juice with no added sugar: exempt from excise tax
• Fruit juice with added sugar: 50% excise tax (sweetened drink)
• Sparkling water (unflavored, no sweetener): exempt
• Flavored sparkling water with sugar: 50% (both carbonated and sweetened)
• Coffee drinks with added sugar: 50% (sweetened drink)
• Milk-based drinks (50%+ milk content, no added sugar): exempt
• Baby formula and medical nutrition: exempt

How Is Excise Tax Calculated?

Excise tax is calculated on the higher of two values: the designated retail price (set by the FTA or by the producer) or the deemed import price (based on the customs value). For a product with a retail price of AED 10 and a 100% tax rate, the excise tax is AED 10 — making the pre-tax value AED 10 and the retail price AED 20. For a 50% rate, a product with a retail price of AED 10 has AED 3.33 in excise tax embedded (50% of the AED 6.67 pre-tax value).

The calculation depends on the rate:

For 100% rate products (tobacco, energy drinks, e-smoking):

Excise tax = Retail price × (100% ÷ (100% + 100%)) = 50% of retail price

Or equivalently: Excise tax = Pre-tax price × 100%

Example: Cigarette pack retail price AED 20

• Pre-tax value: AED 10
• Excise tax: AED 10 (100% of pre-tax value)
• Total: AED 20

For 50% rate products (carbonated drinks, sweetened drinks):

Excise tax = Retail price × (50% ÷ (100% + 50%)) = 33.33% of retail price

Example: Soft drink retail price AED 3

• Pre-tax value: AED 2
• Excise tax: AED 1 (50% of pre-tax value)
• Total: AED 3

The price basis:

The FTA maintains a list of designated retail prices for common products (especially tobacco). If you import a product not on the list, you must declare the intended retail price.

Who Must Register for Excise Tax?

Any person who imports, produces, stockpiles, or releases excise goods in the UAE must register with the FTA for excise tax. This includes importers (even occasional ones), local manufacturers, warehouse operators in designated zones, and anyone who stockpiles excise goods prior to a tax rate change. Registration must be completed before the first taxable event. There is no registration threshold — even a single import of excise goods triggers the obligation.

Registration process:

1. Create an FTA e-Services account
2. Submit the Excise Tax Registration form online
3. Provide trade license, passport copies, customs code, and product details
4. FTA reviews and approves (typically 5–20 business days)
5. Receive Tax Registration Number (TRN) for excise tax

Important: Your excise tax TRN is separate from your VAT TRN. If you are registered for both, you will have two different TRNs.

How and When Are Excise Tax Returns Filed?

Excise tax returns are filed monthly through the FTA's EmaraTax portal. The return is due within 15 days after the end of each tax period (calendar month). The return must declare all excise goods produced, imported, or released during the period, along with the tax due. Payment must accompany the return. Late filing attracts a fixed penalty of AED 1,000 for the first offense and AED 2,000 for repeat offenses within 24 months.

Filing timeline:

Return contents:

• Opening stock of excise goods
• Goods imported during the period
• Goods produced during the period
• Goods released from designated zones
• Goods exported (zero-rated)
• Goods transferred to designated zones (suspended)
• Closing stock
• Tax due calculation

Practical tip: Maintain a daily excise goods movement log. Tracking inventory daily is far easier than reconstructing monthly totals at filing time. Your warehouse management system should generate excise-specific reports.

What Is the Digital Tax Stamp System?

The Digital Tax Stamp (DTS) system requires all tobacco products sold in the UAE to carry a unique, serialized digital stamp. Introduced in phases starting 2019, it enables the FTA to track every tobacco product from manufacturer to retailer. Each stamp contains a unique identifier linked to the FTA's tracking system. Products without valid stamps are considered illicit and subject to seizure. The system is operated by De La Rue under contract with the FTA.

How DTS works:

1. Manufacturer/importer orders digital stamps from the DTS system
2. Stamps are applied to each individual product unit and each master case
3. Products are scanned at every supply chain point (import, warehouse, distribution)
4. The FTA can verify any product's authenticity by scanning the stamp
5. Retailers can verify stamps using a mobile app

Compliance requirements:

• All tobacco products must carry valid DTS before sale
• Stamps must be applied at the point of manufacture (for imports) or before release
• Each stamp has a unique code traceable to the registrant
• Damaged or defective stamps must be reported and destroyed per FTA procedures
• Records of all stamp orders, applications, and disposals must be kept for 5 years

Penalties for non-compliance:

• Sale of unstamped products: seizure + administrative penalties
• Possession of counterfeit stamps: criminal prosecution
• Failure to scan at supply chain points: administrative penalties

How Does Excise Tax Apply in Free Zones?

Free zones that are "designated zones" for excise tax purposes allow excise goods to be stored without triggering the tax. The tax is suspended while goods remain in the designated zone. It becomes payable only when goods are released into the UAE market (i.e., moved out of the designated zone for domestic consumption). Goods transferred between designated zones or exported from a designated zone remain tax-free. Not all free zones qualify as designated zones — only those meeting specific FTA criteria.

Designated zone requirements:

• Physical boundary (fenced or otherwise delineated)
• Security measures and inventory controls
• Customs supervision or equivalent oversight
• Ability to track goods entering and leaving
• FTA approval as a designated zone for excise purposes

Common designated zones for excise goods:

• Jebel Ali Free Zone (JAFZA)
• Khalifa Industrial Zone Abu Dhabi (KIZAD)
• Sharjah Airport International Free Zone (SAIF Zone)
• Ras Al Khaimah Economic Zone (RAKEZ)

Critical compliance point: If you operate in a designated zone and release goods without paying excise tax, the FTA will assess the tax, plus a penalty of 50% of the unpaid tax amount.

How Do Excise Tax and VAT Interact?

Excise tax and VAT are separate taxes, but they compound. VAT is charged on the excise-inclusive price. This means the consumer pays VAT on top of the excise tax. For a product with 100% excise tax and 5% VAT, the total tax burden is approximately 105% of the pre-tax price. The excise tax is not a VAT input — you cannot claim it back as input VAT. It is a cost that increases the price on which VAT is then calculated.

Calculation example — energy drink:

Total tax burden: AED 2.20 on a AED 2.00 pre-tax product = 110% effective tax rate.

Calculation example — carbonated drink:

Total tax burden: AED 0.86 on a AED 1.50 pre-tax product = 57.3% effective tax rate.

For VAT return purposes:

• Excise tax paid on imported goods is part of the cost of goods — not input VAT
• VAT is calculated on the selling price, which includes the embedded excise tax
• If you are both excise-registered and VAT-registered, you file separate returns on different schedules

What Are the Penalties for Excise Tax Non-Compliance?

Excise tax penalties are severe. Failure to register carries a penalty of AED 20,000. Late return filing starts at AED 1,000 and doubles for repeat offenses. Late payment triggers an immediate 2% penalty plus 4% after 7 days and 1% per day thereafter (capped at 300% of the tax due). Tax evasion — deliberately concealing excise goods or falsifying records — is a criminal offense with fines up to five times the evaded tax plus imprisonment.

Voluntary disclosure reduces penalties. If you discover an error in a filed return, submit a voluntary disclosure within 20 business days. The penalty is reduced compared to an FTA-discovered error.

What Records Must Excise Tax Registrants Maintain?

Excise tax registrants must maintain records for a minimum of 5 years (7 years if a voluntary disclosure was filed). Required records include all import documents (customs declarations, bills of lading, commercial invoices), production records, stock movement logs, sales records, excise tax returns and payment receipts, digital tax stamp records, and any correspondence with the FTA. Records must be in Arabic or English and stored in a way that allows the FTA to access them within 5 business days of a request.

Mandatory records:

1. Customs declarations for all imports of excise goods
2. Production logs (for manufacturers) — daily quantities by product
3. Stock movement records — receipts, transfers, releases, disposals
4. Sales invoices showing excise-inclusive pricing
5. Filed excise tax returns and payment confirmations
6. Digital tax stamp ordering, application, and disposal records
7. Price lists and designated retail price calculations
8. Export documentation (for zero-rating claims)
9. Destruction or disposal certificates (for damaged/expired goods)
10. All FTA correspondence and audit documentation

Keep Reading

• VAT Penalties Matrix in UAE
• VAT and Free Zone Transactions
• FTA VAT Audit Preparation Guide
• VAT Consultant Directory

Frequently Asked Questions

Does excise tax apply to goods in transit through the UAE?

No. Goods transiting through the UAE (not cleared for domestic consumption) are not subject to excise tax. They must remain under customs control throughout transit and must be exported within the timeframe specified by customs. If goods are diverted from transit to domestic consumption, excise tax becomes immediately payable.

Can I get a refund of excise tax on exported goods?

Yes. If you import excise goods, pay the tax, and later export them, you can claim a refund from the FTA. You must provide export documentation (customs declaration, bill of lading, proof of delivery at destination) and submit a refund application through EmaraTax. The refund process typically takes 20–40 business days.

Is excise tax deductible for corporate tax purposes?

Excise tax paid is part of the cost of goods sold (for traders) or cost of production (for manufacturers). As such, it is indirectly deductible — it reduces gross profit and therefore taxable income. It is not a separately deductible expense; rather, it is embedded in the cost of inventory.

Do restaurants pay excise tax on carbonated drinks they serve?

Restaurants do not pay excise tax directly. The tax is paid by the importer or producer at the point the product enters the UAE market. By the time the restaurant buys soft drinks from a distributor, the excise tax is already embedded in the purchase price. The restaurant then marks up and sells at a retail price that includes the embedded excise.

How does the FTA audit excise tax compliance?

The FTA conducts both desk-based reviews and physical inspections. Desk reviews compare your filed returns against customs import data — any discrepancies trigger inquiries. Physical inspections include warehouse visits to verify stock counts against records and check for unstamped tobacco products. The FTA also runs market surveillance, purchasing products from retailers and verifying stamps.

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