Tax

Excise Tax in the UAE: A Complete Guide

2025-12-22 · 5 min read · By Aureus Worldwide

Excise tax is the UAE's "sin tax", a levy aimed not at raising broad revenue but at discouraging consumption of goods seen as harmful to health or the environment. It predates corporate tax and works very differently from VAT: there is no registration threshold, the rates are high, and obligations can arise from simply stockpiling the wrong goods. Businesses dealing in tobacco, energy drinks or sweetened beverages need to understand it precisely. This guide explains UAE excise tax: the goods, the rates, who must register, and how returns work.

What excise tax is, and why it exists

Excise tax is an indirect tax on specific goods considered harmful to health or the environment. Its purpose is partly to reduce consumption of those goods and partly to raise revenue from them. Because the goal is behavioural, the rates are deliberately high, often doubling the price of the product.

Which goods are taxable

Excise tax applies to a defined list of excise goods, which has expanded over time. It commonly includes:

• Tobacco and tobacco products
• Electronic smoking devices and tools
• Liquids used in electronic smoking devices
• Energy drinks
• Carbonated drinks
• Sweetened drinks

The precise list is set by the FTA and has grown since excise tax was introduced, so confirm whether your specific product is in scope rather than assuming.

The rates

Excise tax is charged as a percentage of the taxable price of the goods. Typical rates are:

At 100%, the excise effectively doubles the base price before VAT. The taxable price is determined under FTA rules (often by reference to a designated retail price or a higher of methods), so the calculation base matters. Because goods and rates can change, confirm the current figures with the FTA.

Who must register

Unlike VAT, excise tax has no turnover threshold. You must register if you carry out any of these activities with excise goods:

• Importing excise goods into the UAE
• Producing excise goods in the UAE
• Stockpiling excise goods in certain circumstances
• Releasing excise goods from a designated (excise) zone

A stockpiler can be caught even without importing or producing, for example, holding excess excise goods on which tax has not been paid. This catches businesses by surprise, so review your inventory if you hold any excise goods.

Designated zones and the duty point

Excise tax operates with the concept of designated zones, registered areas where excise goods can be held without the tax becoming due. The tax generally becomes payable when goods are released for consumption, for instance, when they leave a designated zone for the local market. Managing goods through designated zones, with proper records, is central to excise compliance for importers and producers.

Returns and payment

Registered businesses file excise tax returns with the FTA and pay the tax due. In outline:

1. Register for excise tax before carrying out a taxable activity
2. Maintain records of excise goods held, imported, produced and released
3. File excise tax returns for each period
4. Pay the excise tax due by the deadline

Excise returns and record-keeping are detailed, and the high rates mean errors are costly. As with other taxes, retain records so every figure can be evidenced.

How excise interacts with VAT and customs

Excise goods can attract multiple charges. On import, a product may face customs duty, excise tax and VAT, and the order in which they apply affects the VAT base (VAT is generally calculated on a value that already includes excise). For the customs side, see our customs duty guide; for import VAT and the reverse charge, see our VAT on imports and exports guide. Treating these as one combined cost stack, rather than in isolation, is essential for pricing.

How excise differs from VAT at a glance

It helps to see the two indirect taxes side by side, because businesses often wrongly assume excise behaves like VAT:

The standout differences are the absence of a threshold and the fact that excise is generally not recoverable down the chain, it is a real cost embedded in the price, unlike VAT, which a registered business usually reclaims.

Excise tax has no threshold and high rates, and stockpiling alone can trigger registration. If your business touches tobacco, vaping products or sweetened drinks, assume you are in scope and confirm the detail.

Stay current

The list of excise goods and the rates have been extended since excise tax began, and the rules around taxable price and designated zones are technical. Because all of this is set by the FTA and subject to change, confirm the current goods, rates and procedures with the FTA before relying on them.

How Aureus Worldwide helps

Aureus Worldwide helps businesses determine whether their products are excise goods, register with the FTA, manage designated-zone arrangements, and file accurate excise returns. Our tax team coordinates excise with your VAT and customs position so the combined charges are handled and priced correctly, supported by our accounting team for record-keeping. To get your excise tax compliance right, contact our advisors.

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