UAE Cabinet Decision No. 197 of 2025
The United Arab Emirates has issued a comprehensive update to its excise tax regulations through Cabinet Decision No. 197 of 2025, marking the UAE Excise Tax Update 2025. Set to come into force on January 1, 2026, this legislation repeals the previous framework established under Cabinet Decision No. 52 of 2019 and introduces refined definitions, specific tax rates, and stricter compliance mechanisms for excise goods.
Scope of Excise Goods
The Decision categorizes specific products as Excise Goods, subjecting them to tax regulation. These include:
- Tobacco and Tobacco Products: This covers all items listed in Chapter 24 of the GCC Common Customs Tariff, whether imported, cultivated, or produced in the State, including electrically heated cigarettes. However, products exclusively intended for smoking cessation are exempt.
- Electronic Smoking Devices and Liquids:
- Liquids: Includes all liquids used in electronic smoking devices, regardless of whether they contain nicotine.
- Devices: Includes all electronic smoking devices and tools, regardless of whether they contain nicotine or tobacco.
- Energy Drinks: Any beverage marketed as an energy drink containing stimulant substances like caffeine, taurine, ginseng, or guarana. Covers liquids as well as concentrates, powders, gels, and extracts.
- Sweetened Drinks: Any product intended for consumption as a drink (including powders, gels, and concentrates) to which a source of sugar or sweetener has been added.
Exclusions and Special Cases
The Decision explicitly excludes certain beverages from the “Sweetened Drink” definition. These exclusions include:
- Ready-to-drink beverages containing at least 75% milk or milk substitutes.
- Baby formula and baby food.
- Beverages for special dietary needs or medical uses.
- Beverages prepared in restaurants and served in open, unsealed containers for immediate consumption.
Alcoholic beverages are explicitly excluded from the definitions of Energy and Sweetened Drinks.
Tax Rates and Calculation Methods
The new framework applies distinct tax rates depending on the category of the good. Notably, sweetened drinks are now taxed based on a tiered system related to sugar content.
Standard Percentage Rates
A 100% Tax Rate applies to the following categories:
- Tobacco and tobacco products.
- Electronic smoking devices and tools.
- Liquids used in electronic smoking devices and tools.
- Energy drinks.
Tiered Rates for Sweetened Drinks
For Sweetened Drinks, the tax amount is determined by the quantity of sugar or other sweeteners per 100ml:
- High Sugar (8g or more): Drinks containing 8 grams or more of sugar/sweeteners per 100ml are taxed at AED 1.09 per litre.
- Medium Sugar (5g to <8g): Drinks containing 5 grams or more, but less than 8 grams are taxed at AED 0.79 per litre.
- Low Sugar (<5g): Drinks with less than 5 grams of sugar/sweeteners are taxed at AED 0 per litre.
- Artificial Sweeteners Only: Drinks containing only artificial sweeteners (or mixed with less than 5g of sugar) are also axed at AED 0 per litre.
Note: If a drink contains naturally occurring sugar, this amount is counted toward the total sugar content calculation.
Determining the Excise Price
The tax is calculated based on the Excise Price, which is defined as the higher of two values:
- The price published by the Federal Tax Authority in a standard price list.
- The Designated Retail Sales Price minus the tax included therein.
The Designated Retail Sales Price is determined by the recommended selling price identified by the importer or producer (excluding VAT) or the average market retail price. For goods taxed at 100%, the tax component is calculated as half of the designated retail sales price. Excise Price of concentrates, powders, gels or extracts shall be calculated in accordance with the mechanism specified by the Minister.
Compliance and Authority Procedures
The Federal Tax Authority (FTA) holds the power to verify product classifications.
- Lab Testing: The FTA may request documents, lab tests, or evidence to identify ingredients.
- Burden of Proof: Producers of sweetened drinks must submit a lab report proving sugar quantity. If they fail to do so, the product will be taxed at the highest category until proven otherwise.
- Rounding: When calculating tax, fractions of a Fils are rounded to four decimal places for registration, while the final Tax Due is rounded to the nearest Fils.
Conclusion
The new excise framework emphasizes health-focused taxation and compliance transparency. Businesses dealing in beverages, tobacco, and electronic smoking products must ensure accurate sugar content disclosures, maintain lab certification records, and update pricing systems in line with FTA standards. This reform strengthens the UAE’s stance as a responsible and forward-looking tax jurisdiction, aligning fiscal policy with public health objectives.
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