How to Calculate Excise Tax in UAE?

Excise feels small on paper but heavy when it comes to cash calculations. The excise tax in UAE puts 50 percent tax on most sweetened and fizzy drinks and 100 per cent tax on tobacco, vapes and energy drinks. 

One wrong rate or price can flip margins. In this guide, we will break down what excise tax is in the UAE, list current excise goods, walk you through step-by-step real calculation examples, and explain how accounting for excise taxes in the UAE can simplify audits.

What is Excise Tax in UAE?

The UAE treats excise as a health tax. It stays on products that harm health or push risky habits, not on regular food or services. Federal Decree-Law No. 7 of 2017 created the system and linked it to the Federal Tax Authority.

In short, excise tax in UAE is a one-time charge on specific goods when they first enter use in the local market. That moment could be local production, import into the country or release out of an excise warehouse.

Once tax is paid at that point, the same stock does not face excise again, even if it moves through many wholesalers before it reaches a shop shelf.

Excise Tax Items in UAE and Their Rates

Calculate excise only when a product falls on the excise list. Current excise tax items in UAE fall into these bands:

• Tobacco and tobacco products are taxed at 100 percent.
• Energy drinks are taxed at 100 percent.
• Electronic smoking devices and refill liquids taxed at 100 percent.
• Carbonated drinks are taxed at 50 percent.
• Sweetened drinks with added sugar or sweeteners taxed at 50 percent.

If a product fits two categories, the higher rate is implemented. A sugary energy drink is treated as an energy drink, not a simple sweetened drink. 

Cabinet Decision 99 of 2025 keeps these headline rates but prepares a sugar-based model for some drinks in 2026, so recipes and labels matter more now.

How the Excise Price Works?

Never apply the rate straight to your selling price in a casual way. The law uses an “excise price”. That figure comes from the higher of two numbers: the FTA’s published standard price or the designated retail price without VAT.

The rules then give an easy shortcut so teams avoid confusion every time:

• For 50 percent goods, tax equals one third of the designated retail price.
• For 100 percent goods, tax equals half of the designated retail price.

So, if a one litre sweetened drink has a retail price of AED 9 (before VAT), excise is AED 3. The remaining AED 6 is the excise base. The shelf price still looks like AED 9 to the shopper.

For a vape kit at AED 200, excise is AED 100. The other AED 100 is the excise base. VAT later applies on the full AED 200, not just on the base.

How To Calculate Excise Tax in UAE: Step-By-Step Process

If you want a simple method for how to calculate excise tax in UAE, keep the following four steps in mind.

Step 1: Check product against the excise list

Read the ingredient label and product use, then compare with the legal list. A flavoured drink with sugar, a vape liquid or an energy shot will usually qualify even if branding feels soft.

Step 2: Fix the designated retail price

Set a realistic retail price that matches actual shelf prices. This figure excludes VAT. The FTA can challenge a very low price, so keep proof such as price lists or contracts.

Step 3: Apply the shortcut

• For 50 percent items, excise equals one third of the retail price.
• For 100 percent items, excise equals half of the retail price.

That single move gives tax per can, bottle or device. Multiply by quantity released in the period for your return.

Step 4: Watch imports and customs values

For imports, the excise price cannot drop below the customs value in dirhams plus customs duty. If your retail-based excise price is lower, you must use the customs value instead.

So, if CIF plus duty on a box of vape liquid is AED 60 but your retail working gives AED 50, excise price becomes AED 60. At 100 percent, tax is AED 60 per box.

Accounting for Excise Taxes in UAE

Inside the ledger, excise behaves like a cost, not a recoverable tax. So accounting for excise taxes in UAE follows three simple rules:

• Treat excise as part of the cost of goods or as a separate tax expense line that reduces margin on excise items.
• Keep separate control accounts for excise and VAT so teams do not mix them.
• Tie excise payments to stock movements, not only to sales invoices.

Best practice is to track excise per SKU inside the ERP. That way, show an auditor how many cans, bottles or devices moved in each month and how that linked to excise paid.

Common Mistakes Found in Excise Files

Mostly, excise file mistakes follows the same following patterns:

• Excise calculated on wholesale prices instead of excise price.
• Promotions where free units leave the warehouse but do not appear in the excise return.
• Imports where customs values changed, yet no one updated excise workings.
• Stock write-offs or losses that never went through excise adjustment forms.

None of these issues are impossible to fix. They become costly only when FTA discovers them first during an excise audit or warehouse inspection.

How Arnifi Helps With Excise Tax in UAE?

With Arnifi, the finance team can turn the legal rules into a product-by-product map. That includes checking each item against the excise list, setting a clean retail price file, building ready-to-use calculation sheets and lining up VAT and corporate tax numbers with excise returns.

For companies that hold stock across Dubai, Abu Dhabi and free zones, Arnifi can also review warehouse approvals and test a few periods in detail before any FTA visit. The goal is simple: no surprises on rate, base or quantity. Get started by hiring Arnifi’s expert accounting and bookkeeping services in UAE.

FAQs

1. How often do excise taxpayers file returns in the UAE?

Most registrants file monthly or quarterly excise returns through the FTA portal, declare quantities released for consumption and pay tax. The frequency depends on licence type and conditions in the registration certificate.

2. Does excise tax apply to every drink with sugar in the UAE?

Excise covers drinks with added sugar or sweeteners that fit set definitions. Some dairy drinks and plain juices can sit outside the regime. Product labels and Cabinet Decision 52 of 2019 need checking each time.

3. Can a business recover excise tax paid on local sales?

No. Excise on local sales is a final cost. Refunds usually appear only when excise goods are exported under conditions that meet FTA rules or destroyed under supervision with approval in place.

4. What records should excise taxpayers keep in case of audit?

They should keep product lists, composition details, retail price workings, import documents and warehouse movement reports plus filed returns and FTA correspondence for at least five years so movements match tax paid clearly.

5. When does a business need to register for excise tax in the UAE?

A business must register once it produces, imports or stocks excise goods for business purposes. There is no minimum threshold, so even small volumes trigger registration once activities start.