Tax laws rarely stand still — especially in economies that evolve as swiftly as the UAE’s. With the issuance of Federal Decree-Law No. 7 of 2025, the Excise Tax framework enters a new phase of administrative clarity, long-term fiscal balance and ensuring fairness.
Effective 1 October 2025, this amendment introduces sharper clarity in tax calculation, registration, and deduction mechanisms, reaffirming the UAE’s position as a regional leader in efficient tax administration.
Evolution of the Excise Tax Regime
The UAE’s journey with Excise Tax began with Federal Decree-Law No. 7 of 2017, which introduced taxation on products deemed harmful to health or the environment, such as tobacco, energy drinks, and carbonated beverages.
Subsequent amendments — particularly Federal Decree-Law No. 19 of 2022 — refined procedural elements, including tax registration, refunds, and limitation periods.
Now, Federal Decree-Law No. 7 of 2025 builds upon that foundation to close operational gaps, simplify compliance, and provide flexibility for the Federal Tax Authority (FTA) and businesses alike.
👉 For a detailed overview of the goods covered under Excise Tax, applicable tax rates, and valuation mechanisms, you may refer to our earlier publication —
“Understanding Excise Goods and Taxation in the UAE: Cabinet Decision No. 52 of 2019 and 2025 Amendments” (RVG Insights, September 2025).
That article complements this Decree-Law by outlining the scope and pricing structure of excisable goods as defined by Cabinet Decisions.
Key Highlights of Federal Decree-Law No. 7 of 2025
Revised Tax Calculation Framework
One of the most significant updates lies in how excise tax rates are determined and applied. Under the amended Article 3:
- The Cabinet, based on the Minister of Finance’s recommendation, will determine tax rates either as a percentage of the Excise Price (ad valorem) or as a fixed amount per unit of measurement.
- The maximum percentage rate remains capped at 200% of the Excise Price.
- The specific rate cannot exceed AED 100 per unit of measurement.
- The Cabinet is also authorized to define the unit of measurement, basis for calculating Excise Price, and the method of computation.
Strengthened Registration Obligations
The amendment clarifies timelines and conditions for Excise Tax registration, emphasizing accountability and compliance:
- Any person conducting or intending to conduct activities subject to Excise Tax must register within 30 days of the end of the month in which such activities occurred or were planned.
- Persons indirectly liable — where another party failed to pay the tax — must also register within 30 days from the date they became aware, or should have become aware, of that failure.
- The Executive Regulation will specify the effective date of registration and related procedural details.
Expanded Definition of Deductible Tax
Taxpayers may now deduct:
- Tax paid on exported excise goods.
- Tax paid on inputs used in producing other taxable excise goods.
- Tax paid on unsold goods where the applicable tax rate has decreased.
- Tax paid in other cases determined by the FTA under prescribed conditions
Clearer Payment Responsibilities
The 2025 amendment reinforces the principle that all collected tax must be remitted to the FTA, even if collected erroneously. Additionally:
- Persons exempted from registration must settle excise tax due upon importation.
- Tax collected by any person, under any pretext, is deemed payable to the Authority and treated as due tax.
Conclusion
The significance of Federal Decree-Law No. 7 of 2025 extends beyond procedural clarity—it reflects the UAE’s measured transition toward a more mature and principled tax ecosystem.
By strengthening how Excise Tax is calculated, declared, and remitted, the amendment reaffirms that compliance is not merely about paying tax, but about preserving confidence in the system that governs it.
At RVG, we remain committed to helping businesses interpret and adapt to such regulatory developments with clarity, accuracy, and foresight—ensuring compliance becomes not just a requirement, but a strategic strength.
