How to calculate excise tax in the UAE

Before 1 January 2026 every excise good was taxed as a percentage of a value. That is no longer true. Cabinet Decision No. 197 of 2025 repealed Cabinet Decision No. 52 of 2019 and split the arithmetic in two: four categories are still taxed as a percentage of the excise price, while sweetened drinks are taxed as a fixed amount of dirhams per litre, banded by how much sugar the drink contains.

The enabling change sits one level up. Article 3 of Federal Decree-Law No. 7 of 2017 originally allowed only a percentage rate. Federal Decree-Law No. 7 of 2025 rewrote it to permit a specific amount per unit of measurement as well, capped at AED 100 per unit. The Cabinet then used that power to price sugar by the litre.

So the first question in any excise calculation is no longer "what is the rate" but "which of the two mechanics applies to this product". Get that wrong and the number is wrong by an order of magnitude, not by a rounding error.

One category disappeared entirely in the same move: carbonated drinks are no longer a standalone excise good. Article 2 of Cabinet Decision No. 197 of 2025 lists five categories, and carbonated drinks are not among them. A sweetened carbonated drink is now caught, if at all, as a sweetened drink and taxed per litre by sugar content. Checked 12 August 2026.

For tobacco, electronic smoking devices, the liquids used in them and energy drinks, the tax is 100% of the excise price. Everything therefore turns on what the excise price is, and Article 11 of Cabinet Decision No. 197 of 2025 defines it as the higher of two figures: the price the Federal Tax Authority publishes for that good in its standard price list, if there is one, or the designated retail sales price less the tax included within it.

The second limb is the one that trips people up, because it is circular on its face — you cannot subtract the tax until you know the tax. Article 11(2) resolves it with a fixed convention: for a good taxable at 100%, the tax inside the designated retail sales price is exactly half of that price. So the excise price is half the designated retail sales price, and the tax is the other half.

Article 12 then tells you what the designated retail sales price is: the higher of the recommended retail selling price identified, declared and affixed to the goods by the importer or producer, and the average retail selling price of that good in the market. Both are taken after deducting VAT, and the recommended price expressly excludes any uplift from selling the product inside a hotel, restaurant or similar establishment for consumption on the premises.

Both are 100% goods, so both follow the same five steps. The figures below are illustrations chosen to show the arithmetic — they are not published prices, and the actual excise price for any real product depends on that product's declared and market prices and on whether the Authority has published a standard price for it.

Take an energy drink whose shelf price is AED 12.60 including VAT. Removing VAT gives AED 12.00. Assume the market average is no higher, so the designated retail sales price is AED 12.00. Half of that is AED 6.00, so the excise price is AED 6.00 and the excise tax is AED 6.00. The shelf price decomposes as AED 6.00 of product value, AED 6.00 of excise tax and AED 0.60 of VAT.

Now a pack of 20 cigarettes at AED 21.00 including VAT. VAT out: AED 20.00. Half: AED 10.00. The excise price is AED 10.00 and the excise tax is AED 10.00.

The pattern is worth internalising because it is a useful sense-check on any 100% good: the excise tax is half the pre-VAT retail price, and the pre-VAT retail price is double the excise price. If a supplier's calculation does not have that shape, either the FTA's published price list is doing the work under Article 11(1)(a), or something is wrong.

For sweetened drinks there is no excise price at all. You do not need the retail price, the market average or the FTA's list. You need two numbers: how many grams of sugar and other sweeteners the drink contains per 100ml, and how many litres you are importing, producing or releasing.

The band comes first. Under 5g per 100ml, or artificially sweetened only, is AED 0 per litre. From 5g up to but not including 8g is AED 0.79 per litre. At 8g and above it is AED 1.09 per litre. Article 10(3) is important here: naturally occurring sugar counts towards the total alongside added sugar, so a fruit juice with sugar added is measured on the combined figure, not on the added portion.

Then multiply. A 330ml can at 10.6g per 100ml sits in the top band: 0.33 litres × AED 1.09 = AED 0.3597 of excise per can. A pallet of 24,000 such cans is 7,920 litres, so AED 8,632.80. A one-litre carton at 6.2g per 100ml sits in the middle band and carries AED 0.79.

Article 10(4) sets the rounding: to four decimal places of the dirham at the level of the individual good when you register it with the Authority, and to the nearest fils for the tax due on a periodic return, using ordinary arithmetic rounding. That is why per-unit figures such as AED 0.3597 are legitimate at registration and only the return total is rounded to fils.

A one-litre bottle of squash is not taxed as one litre. Article 7(1) of Cabinet Decision No. 197 of 2025 brings concentrates, powders, gels, extracts and any other form that can be converted into a sweetened drink inside the definition, and Article 10(2) says the sugar content is measured on the final product form, in accordance with the producer's guidelines. The taxable volume is the volume of drink the packet makes, not the volume of the packet.

Where the producer publishes dilution guidelines and they hold up, the calculation is straightforward: work out the litres of ready-to-drink product one unit yields, establish the grams of sugar per 100ml of that finished drink, band it, and multiply. A concentrate that makes 5 litres of a drink testing at 9g per 100ml carries 5 × AED 1.09 = AED 5.45 per bottle.

Where no guidelines exist, or the Authority proves them inaccurate, Federal Tax Authority Decision No. 10 of 2025 supplies a fallback that has been in force since 1 January 2026. The taxable person obtains a laboratory report on the unit of concentrated product showing the total grams of sugar and other sweeteners in it. The volume of the final drink is then the total grams of sugar multiplied by 20, and the dilution ratio is that volume divided by the volume or weight of the unit.

Run the arithmetic on that formula and its effect is visible: multiplying grams by 20 to get millilitres places the notional finished drink at exactly 5g per 100ml, which is the bottom of the AED 0.79 band. A 1,000ml concentrate whose laboratory report shows 400g of total sugar is deemed to make 8,000ml of drink, a dilution ratio of 8, and carries 8 × AED 0.79 = AED 6.32 of excise. Two exceptions in Article 2(2) of that Decision pull products out of the mechanism altogether: a liquid concentrate testing under 5g per 100ml goes into the low-sugar category, and one containing only artificial sweeteners goes into the artificially sweetened category — both at AED 0 per litre.

Excise and VAT are separate taxes under separate laws, and they stack in a fixed order. Excise is calculated first and forms part of the price on which VAT is then charged. That order is implicit in Article 12 of Cabinet Decision No. 197 of 2025, which measures the designated retail sales price after deducting VAT — VAT sits outside the excise base, and excise sits inside the VAT base.

The consequence is arithmetic. For a 100% good, the shelf price a consumer sees is the excise price, plus an equal amount of excise, plus 5% VAT on the sum of the two. On the energy drink above: AED 6.00 + AED 6.00 = AED 12.00, then 5% of AED 12.00 is AED 0.60, giving AED 12.60. On a sweetened drink the same order applies, with the per-litre amount taking the place of the percentage.

The two taxes are also administered separately. Excise registration is not VAT registration, an excise return is not a VAT return, and being registered for one says nothing about your obligations under the other.

Most excise errors are not arithmetic errors. They are errors about which figure goes into the arithmetic in the first place.

• Using the shelf price instead of the designated retail sales price. The designated retail sales price is net of VAT and is the higher of your declared price and the market average. Starting from a VAT-inclusive till price overstates the base by 5%.
• Using the restaurant or hotel price. Article 12(1)(a) expressly excludes the uplift that comes from selling the good inside a hotel, restaurant or similar establishment for consumption on the premises.
• Ignoring the FTA's published price list. Article 11(1) takes the higher of the published price and your derived price. A published price you have not checked silently makes your figure too low.
• Counting only added sugar. Article 10(3) folds naturally occurring sugar into the total, which can move a fruit-based drink from the AED 0.79 band into the AED 1.09 band.
• Taxing the packet rather than the drink. For concentrates the volume is the finished drink's volume, derived from producer guidelines or, failing that, from the Authority's own formula.

One further trap sits outside the arithmetic entirely. Article 13(1) and 13(3) let the Authority demand documents, laboratory tests or other evidence to prove what a product actually is, and where a person fails to provide them in time the Authority may treat the product as an excise good until proven otherwise. The default direction of travel is into the tax, not out of it.

The number you have calculated has a deadline attached to it. Under Article 17 of Cabinet Decision No. 37 of 2017, the executive regulation of the Excise Tax Law, the tax period is the Gregorian month. Article 18 requires the return to be filed no later than the fifteenth day of the month following the tax period, and Article 19 requires the tax to be paid by the same fifteenth day.

The return is not the only filing. Article 20 requires regular declarations covering excise goods to be imported, excise goods produced in the State, and excise goods moved out of a designated zone, in the manner and on the deadlines the Authority determines. In practice the declarations carry the product-level detail and the monthly return settles the money.

Deductible tax then reduces what you pay. Article 16 of Federal Decree-Law No. 7 of 2017 allows a deduction for tax paid on excise goods that were exported, on goods that became a component of another excise good on which tax is or will be due, and — the limb amended in 2025 — on unsold stock where the rate or amount has since fallen, to the extent of the fall. Article 15 then makes the payable tax for the period the due tax less the deductible tax. If deductions exceed the tax due, Article 20 of the Decree-Law carries the excess forward until it can be offset or refunded.