Ministerial Decision No. 1 of 2025: A Major Step in UAE Excise Tax Implementation

Overview:

On January 3, 2025, the UAE Ministry of Finance issued Ministerial Decision No. 1 of 2025, updating excise tax regulations. The decision refines existing tax guidelines, considering previous laws such as Federal Decree-Law No. 7 of 2017 and Cabinet Decision No. 52 of 2019. Key changes include revised excise tax rules for electronic smoking devices, related liquids, and consumables like concentrates, powders, and gels. This blog focuses on the principal changes, covering taxation for e-liquids for electronic cigarettes, price adjustments in taxable goods, and an overturn of some provisions that previously were in force.

Excise Tax on Liquids for Electronic Smoking Devices

Ministerial Decision No. 1 of 2025 amends the excise tax law for liquids used in electronic smoking devices, regardless of their nicotine content. To achieve uniformity, the decision requires the use of Harmonized System (HS) codes from Chapter 24 of the GCC classification system. This will bring UAE regulations in line with the general GCC standards, making trade easier and ensuring that taxation is fair. The excise tax will be imposed on the following electronic smoking products: e-cigarettes, electronic shisha, and heated tobacco devices.

Excise Pricing for Concentrates, Powders, Gels, and Extracts

The order also introduces new excise pricing requirements for concentrates, powders, gels, and extracts that are used to manufacture carbonated, energy, or sweetened beverages. The excise price is the higher of:

• The price published by the tax authority.
• The “Designated Selling Price” declared by the importer or producer before discounts.

Retailers must maintain accurate records to ensure compliance and correct tax calculations.

Previous Decisions & New Implementation

The new decision shall hereby annul Ministerial Decision No. 236 of 2019, as well as any provisions thereof conflicting with the present decision. The decision was published in the UAE’s Official Gazette, effective January 3, 2025. Businesses must now comply with these updated regulations to avoid penalties and ensure accurate tax reporting.

Conclusion

Ministerial Decision No. 1 of 2025 strengthens the UAE excise tax system, aligning it with GCC standards and enhancing compliance. Businesses must adapt to these updates, ensuring proper tax calculations and reporting. Consumers can expect greater pricing transparency for excise goods.

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