UAE Excise Tax 2026: Tax on Cigarettes ,Shisha Tobacco and E-Smoking Products Explained
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From 1 September 2026, e-liquids used in vapes and other electronic smoking devices carry
a new minimum excise price of AED 1/ml in the UAE a AED 30 floor on a standard 30ml bottle,
regardless of nicotine content or how it’s marketed. Cigarettes and shisha tobacco are not part of this change. Their minimum excise prices, AED 0.40 per cigarette and AED 0.10 per gram, stay exactly where they’ve been since 2019; they’ve simply been carried forward into the new Cabinet Decision No. 137 of 2026, which replaces the old decision entirely.
For businesses that import, manufacture or warehouse any of these products, the distinction matters more than the headline number. Minimum excise price isn’t the tax it’s the floor the tax is calculated against. Get the classification or the base wrong, and the exposure shows up at the next FTA review, not at the point of sale.This blog provides a general overview of Excise Tax in UAE, focusing on tobacco products and liquids used in electronic smoking devices. It explains minimum excise prices, product categories, and key compliance requirements under the UAE Excise Tax framework.
What Is Excise Tax?
Excise Tax in Dubai a selective tax imposed on specific categories of goods. Unlike VAT, which generally applies to taxable supplies of goods and services, Excise Tax applies to designated products under the UAE Excise Tax framework.
The UAE Excise Tax system covers categories such as tobacco products, electronic smoking devices and liquids, energy drinks, and sweetened drinks, with applicable rates and rules depending on the product category.
Businesses that import, produce, or stockpile excise goods in the UAE, or release them from a designated zone, may be required to register with the Federal Tax Authority, maintain accurate records, and file monthly Excise Tax returns. The return and payment are generally due by the 15th day of the month following the end of the tax period. Businesses should also ensure that their excise goods are correctly classified and registered and that the applicable tax requirements are met.
How Is the Minimum Excise Price Used to Calculate Excise Tax?
Under the UAE’s excise tax framework, minimum excise prices are set for three main categories of products: cigarettes, water pipe tobacco, and liquids used in electronic smoking devices.
Cigarettes
For cigarettes, the minimum excise price is set at 0.4 Dirhams per cigarette. This applies to all cigarettes, whether they are normal cigarettes or electrically heated tobacco products. For a standard pack of 20 cigarettes, the minimum excise price base would be 8 Dirhams. This means that even if a pack is produced or declared at a lower value, the excise tax will be calculated as if the pack costs at least 8 Dirhams.
The minimum excise price establishes a minimum value for determining the excise price of the covered products. By setting a floor, the government makes it harder for manufacturers to compete on price alone.
Water Pipe Tobacco
Water pipe tobacco, often known as shisha or hookah tobacco, is treated differently. The minimum excise price is set at 0.1 Dirhams per gram. This applies to water pipe tobacco, ready-to-use tobacco, and other similar products. The definition includes tobacco mixed with glycerol, and whether or not it contains aromatic oils, extracts, molasses, sugar, or fruit flavourings.
This weight-based approach recognises that water pipe tobacco is typically sold in larger quantities. A 250-gram tub would have a minimum excise price base of 25 Dirhams. A 1-kilogram tub would have a base of 100 Dirhams. By taxing per gram, the system ensures that the tax reflects the actual amount of tobacco sold, regardless of packaging or flavour.
Liquids Used in Electronic Smoking Devices
For liquids used in electronic smoking devices and tools, the minimum excise price is set at 1 Dirham per 1 millilitre. This applies to all such liquids, whether or not they contain nicotine. This is a significant detail, as it prevents sellers from avoiding tax by marketing zero-nicotine liquids as a separate, untaxed category.
Under this rule, a 10ml bottle of e-liquid has a minimum excise price base of 10 Dirhams. A 30ml bottle has a base of 30 Dirhams. A 100ml bottle has a base of 100 Dirhams. This volume-based approach is similar to the weight-based approach for water pipe tobacco. It ensures that the tax is proportional to the quantity of product sold, rather than being influenced by branding, marketing, or nicotine strength.
Product Category | Minimum Excise Price | Applicable From |
Cigarettes, including normal and electrically heated cigarettes | AED 0.40 per cigarette | 1 September 2026 |
Water pipe tobacco, ready-to-use tobacco and other similar tobacco products | AED 0.10 per gram | 1 September 2026 |
Liquids used in electronic smoking devices and tools, whether or not containing nicotine | AED 1.00 per 1 ml | 1 September 2026 |
Who Must Register for UAE Excise Tax?
Businesses Importing Excise Goods into the UAE
Businesses importing Excise Goods into the UAE, including through free zone ports, may need Excise Tax registration. Importers should identify taxable products, determine applicable tax treatment, and maintain accurate customs, import, and product records.
Businesses Manufacturing or Producing Excise Goods
Businesses manufacturing or producing Excise Goods within the UAE may need to register for Excise Tax. Manufacturers should maintain records covering production, inventory, product classification, taxable quantities, Excise Tax calculations, and movements of taxable goods.
Warehouse Keepers Holding Excise Goods
Businesses operating as Warehouse Keepers in a Designated Zone and holding Excise Goods may have registration and compliance obligations. They should maintain accurate records of goods stored, received, transferred, and released from the warehouse.
Businesses Releasing Excise Goods from a Designated Zone
Businesses releasing Excise Goods from a Designated Zone into UAE domestic consumption should assess their Excise Tax obligations. Such releases can trigger tax liabilities, requiring accurate records of quantities, movements, values, and applicable Excise Tax.
Businesses Stockpiling Untaxed Excise Goods
Businesses stockpiling Excise Goods on which Excise Tax has not been paid should assess whether registration obligations apply. Companies should monitor inventories, identify untaxed goods, and determine whether tax registration or payment requirements arise.
Tobacco Businesses
Businesses dealing with cigarettes, tobacco, water pipe tobacco, or similar Excise Goods should assess their registration obligations. Manufacturers, importers, warehouse operators, and businesses holding taxable tobacco products should maintain appropriate product, inventory, and tax records.
Vape and E-Liquid Businesses
Businesses manufacturing, importing, or dealing in electronic smoking devices and e-liquids should assess their Excise Tax obligations. This includes relevant products with or without nicotine, with accurate product classifications, quantities, and tax records required.
Energy Drink Businesses
Businesses manufacturing or importing taxable energy drinks should determine whether Excise Tax registration is required. They should assess product classification and maintain supporting records covering ingredients, quantities, production or imports, inventory, and applicable Excise Tax treatment.
Businesses Dealing with Excise Goods in Designated Zones
Businesses handling Excise Goods within Designated Zones should assess their specific Excise Tax obligations. Storage, transfers, imports, and releases may have different tax consequences, making accurate inventory, movement, and transaction records important for compliance.
Purpose of Excise Tax in UAE
- Public Health: Reduce consumption of products associated with potential health risks, including tobacco, energy drinks, and certain sweetened beverages.
- Government Revenue: Generate additional tax revenue that contributes to government finances and supports public services and national development.
- Consumer Behaviour: Increase the cost of selected products to support changes in consumption patterns, particularly for goods associated with health-related concerns.
- Economic Diversification: Strengthen the UAE’s non-oil revenue base by incorporating Excise Tax into the country’s broader taxation framework.
- Regulatory Oversight: Establish a system for registering, monitoring, and accounting for businesses that manufacture, import, store, or otherwise handle Excise Goods.
- Tax Compliance: Require businesses dealing with taxable goods to maintain records, submit required returns, and account for Excise Tax in accordance with UAE tax legislation.
UAE Excise Tax Penalties for Non-Compliance in 2026
Businesses dealing with excise goods must comply with UAE Excise Tax registration, filing, payment, record-keeping and designated zone requirements. Failure to meet these obligations can result in administrative penalties. The penalty framework was amended under Cabinet Decision No. 129 of 2025, which came into force on 14 April 2026.
- Failure to register for Excise Tax: Businesses required to register must submit their application within the prescribed timeframe. The current penalty framework should be applied when determining the applicable administrative penalty.
- Late filing of Excise Tax returns: Businesses must submit their Excise Tax returns within the applicable deadline. Late filing may result in administrative penalties under the amended penalty framework.
- Late payment of Excise Tax: Businesses must pay Excise Tax due within the prescribed deadline. Administrative penalties may apply where tax remains unpaid after the due date.
- Failure to maintain required records: Businesses must maintain the records and information required under UAE tax legislation. The amended framework provides penalties of AED 10,000 for each violation or AED 20,000 where the same violation is repeated within 24 months.
- Failure to provide tax documents in Arabic: Where requested by the FTA, businesses must provide tax-related data, records and documents in Arabic. The penalty was reduced from AED 20,000 to AED 5,000 under the 2026 amendments.
- FTA inspection of excise businesses: Businesses operating as warehouse keepers or handling excise goods in Designated Zones must maintain the required controls, records and supporting documentation. Designated Zone operations are subject to FTA requirements, including controls over the movement and storage of excise goods.
To avoid problems, businesses should:
- Understand the minimum excise prices for their products.
- Ensure that their invoices and tax calculations reflect the correct excise price.
- Keep detailed records of imports, production, and sales.
- Stay informed about changes to the law and regulations.
- Seek professional advice if they are unsure about their obligations.
How Tulpar Global Taxation Can Assist
Tulpar Global Taxation helps businesses manage UAE Excise Tax obligations with practical, end-to-end support. Our services cover Excise tax registration, UAE ,deregistration, product classification, taxable product assessment, and compliance requirements for businesses importing or manufacturing Excise Goods. Our team supports Excise Tax return preparation, filing reviews, record-keeping requirements, compliance checks, and FTA clarification or reconsideration requests.
We also help businesses understand regulatory changes, including the 2026 updates affecting sweetened beverages and minimum Excise Prices for tobacco products and e-smoking liquids. To discuss your UAE Excise Tax registration, compliance, filing, or advisory needs, email us at info@tulpartax.com or call +971 54 444 5124 for professional assistance.
FAQs:
Why is the cigarette price in Dubai so high?
Excise tax is a major reason. Tobacco is taxed at 100%, with excise generally representing half the designated retail price. The tax base also has a minimum floor, limiting the effect of discounts on excise calculations.
What is the minimum Excise Price for cigarettes in the UAE in 2026?
The minimum Excise Price for cigarettes is AED 0.40 per cigarette. For a standard pack of 20 cigarettes, this represents a minimum Excise Price of AED 8 when determining the applicable Excise Tax under the UAE framework.
What is the minimum Excise Price for shisha tobacco in the UAE?
The minimum Excise Price for water pipe tobacco, including shisha tobacco and similar ready-to-use tobacco products, is AED 0.10 per gram. A 250 gram product therefore has a minimum Excise Price of AED 25 for tax calculation purposes.
What is the minimum Excise Price for vape liquid in the UAE?
From 1 September 2026, the minimum Excise Price for liquids used in electronic smoking devices and tools is AED 1 per millilitre, whether or not the liquid contains nicotine. Businesses should apply this minimum when determining Excise Tax obligations.
Who needs to register for UAE Excise Tax?
Businesses importing, manufacturing, producing, or stockpiling Excise Goods may need to register for UAE Excise Tax. Registration obligations can also apply to businesses operating as Warehouse Keepers or releasing Excise Goods from Designated Zones into domestic consumption.
