Excise Tax is an indirect tax levied on specific excise goods that are either:
- Imported into the UAE,
- Produced within the UAE,
- Released from a Designated Zone, or
- Stockpiled in the UAE (where Excise Tax has not previously been paid on the goods and stockpiling is undertaken for business purposes).
Excise Tax is generally levied on goods considered harmful to the health of the general public. The aim of Excise Tax is, therefore, to discourage consumption of those specific goods.
The Federal Tax Authority (FTA) collects Excise Tax. All businesses involved in manufacturing, importing, stockpiling, and releasing such goods for consumption are advised to adhere to all requirements strictly. Many businesses operating in Dubai and the wider UAE incur unnecessary penalties due to small oversights.
This guide covers the most common excise tax mistakes in the UAE and how to avoid FTA penalties.
What is Excise Tax and Who Must Register?
Excise Tax is charged when goods are produced, imported, or released for consumption in the UAE.
Key rates as of 2026 include:
- Tobacco and tobacco products: 100%
- Electronic smoking devices, tools, and liquids: 100%
- Energy drinks: 100%
- Sweetened drinks (tiered system from 1 January 2026):
- 8 grams or more sugar/sweeteners per litre → AED 1.09 per litre
- 5 grams or more but less than 8 grams → AED 0.79 per litre
- Less than 5 grams, or only artificial sweeteners → AED 0
You must register with the FTA on the EmaraTax portal if you produce, import, stockpile, act as a Warehouse Keeper for a Designated Zone, or release Excise Goods for consumption. Registration is normally required within 30 days of becoming liable.
The standard Tax Period is one calendar month. The due date for filing the Excise Tax return is no later than the 15th day of the calendar month following the end of the Tax Period (or the first working day after, if that date falls on a weekend or public holiday). Excise Tax returns must be submitted online to the FTA.
Common Excise Tax Mistakes and How to Avoid Penalties
1. Late or Missed Registration
Many businesses start trading in Excise Goods without registering in time.
Fine: AED 10,000. Late deregistration can cost AED 1,000 per month (up to a maximum of AED 10,000).
How to Avoid: Register as soon as you become liable. Apply for deregistration within 30 days of ceasing the activity.
2. Errors in Tax Calculation (Valuation Errors)
Tax is calculated on the higher of the price published by the FTA in its standard price list (if available) or the Designated Retail Sales Price (DRSP), less any Excise Tax already included in that price. The DRSP is itself the higher of the recommended retail selling price declared by the importer or producer (after deducting VAT) or the average retail selling price in the market (after deducting VAT). Using only the import cost or wholesale price results in underpayment of tax.
How to Avoid: Always use the highest correct price. Update price lists regularly and register products correctly on the FTA portal.
3. Misclassifying Products (Sweetened Drinks)
The sugar-based tiered system requires classification accuracy. Without an appropriate laboratory test report, the FTA can apply the maximum tax rate.
How to Avoid: Get laboratory tests certified and register products correctly.
4. Late Submission of Returns
Returns must be submitted by the 15th day of the following month.
Penalty: AED 1,000 for the first late filing and AED 2,000 for subsequent delays within 24 months.
How to Avoid: Finalize accounting records, reconcile inventories and transactions, and schedule reminders ahead of each filing deadline.
5. Delayed Tax Payments
Starting from 14 April 2026, the penalty for delayed payment is 14% per annum, calculated monthly on a non-compounded basis on the unpaid amount.
How to Avoid: Plan your finances to avoid delays around the 15th of each month and make payments on time through EmaraTax.
6. Designated Zone and Record-Keeping Problems
Incorrect transfer of goods between Designated Zones, poor stock-keeping records, and a lack of Warehouse Keeper controls are common issues. Failing to keep proper records, or to furnish information on request, also results in fines.
Penalty: The fine is the higher of AED 50,000 or 50% of the tax on the goods related to the Designated Zone violation. Record-keeping penalties are AED 10,000 for a first violation and AED 20,000 for repeated violations within 24 months.
How to Avoid: Follow the FTA’s procedure for movements between zones. Keep proper digital and physical records of stock, pricing, and movements, and keep records in Arabic on request.
7. Failure to Display Inclusive Prices or Furnish a Price List
Prices offered to customers should include Excise Tax, and a business is expected to provide its price list to the FTA when requested.
Penalty: AED 5,000 for failing to display prices inclusive of tax, plus AED 5,000 (first time) or AED 10,000 (repeat) for not submitting the price list.
How to Avoid: Update all price tags, websites, and invoices, and submit the price list promptly whenever it is requested.
Other common errors include problems with Digital Tax Stamps for tobacco products (which can lead to seizure of goods) and failing to correct errors through Voluntary Disclosure. If you find an understatement of more than AED 10,000, a Voluntary Disclosure must be filed within 20 business days.
Simple Ways to Stay Compliant
- Register on time and keep your EmaraTax account up to date.
- Reconcile your inventory, customs information, and sales every month.
- Apply the correct valuation approach.
- Keep organized digital and physical records.
- Correct errors promptly through Voluntary Disclosure.
- Stay informed of FTA guidance from the official website.
Save Your Business Right Now
Small oversights in Excise Tax can become expensive. Good record-keeping and timely filing will save your business from fines imposed by the FTA.
Do you need help with Excise Tax registration, monthly reporting, product classification, Designated Zones, or Voluntary Disclosure in Dubai and the UAE? Get in touch with the tax consultants at Business Tax In The UAE for professional assistance. Let us take care of your compliance so you can avoid fines in the future.