Excise Tax Penalties
Registered Tax Agent Regulated by the FTA (Federal Tax Authority)
Excise Tax Penalties in UAE
Know exactly what triggers a penalty before the FTA’s assessment notice tells you.
The UAE introduced excise tax in 2017 through Federal Decree-Law No. 7 of 2017, applying to businesses that import, produce, or store goods considered harmful to human health or the environment. Compliance with this law is mandatory for every business handling excisable goods, and the Federal Tax Authority issues administrative penalty assessments for a wide range of violations, from late registration through to deliberate tax evasion. Farahat & Co. helps businesses understand their exposure, correct existing compliance gaps, and respond to FTA penalty assessments already issued.
- Penalty exposure review: identifying where your current compliance position carries risk.
- Response to FTA assessments: managing correspondence where a penalty has already been issued.
- Digital Tax Stamp compliance: guidance on marking requirements for tobacco and related products.
- Corrective action: resolving gaps before they escalate into repeat violations with higher penalties.
As a registered FTA tax agent, we help businesses understand exactly which violations carry which penalties, so compliance decisions are made with the actual financial exposure in view.
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General Excise Tax Compliance Penalties
If a taxable person fails to comply with excise tax regulations, the Federal Tax Authority issues an administrative penalty assessment, and where no response is received from the taxable person, the FTA typically follows up with a further assessment after five days. Failure to register when required attracts a penalty of AED 10,000, while failure to deregister when required results in AED 1,000 per month up to a maximum of AED 10,000.
Late payment of tax due carries a 2% penalty immediately after the due date, rising by a further 4% each month thereafter, up to a maximum of 300% of the unpaid tax. Failing to maintain proper records carries AED 10,000 for a first instance and AED 20,000 for repeat violations, and failing to display tax-inclusive prices on excisable goods is treated as a separate violation in its own right, attracting its own penalty assessment.
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What Counts as Tax Evasion Under Excise Tax Law
UAE excise tax law draws a clear line between an administrative compliance failure and deliberate tax evasion, and the consequences differ significantly between the two. The following actions are treated as tax evasion rather than ordinary non-compliance.
Moving Goods Without Paying Due Tax
Tampering With Distinguishing Marks
Submitting False Records or Documents
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Penalties for Excise Goods Marking Non-Compliance
Cabinet Decision No. 33 of 2019 sets out specific penalties for violating the procedures involved in the UAE’s excise goods marking scheme, which applies primarily to tobacco and related products. These marking penalties sit alongside the general compliance penalties above and can apply even where a business has otherwise met its registration and filing obligations correctly.
| Violation | Penalty |
|---|---|
| Handling or possessing specified goods without a mark | AED 50,000 |
| Permitting premises to sell specified goods without a mark | AED 25,000 |
| Altering or overprinting marks on goods | AED 50,000 |
| Failing to report goods movement through the electronic system | AED 20,000 per instance |
| Failing to store marks securely | AED 50,000 |
| Failing to attach marks in the specified location and manner | AED 25,000 |
| Unauthorised supplying, selling, or trading of marks | AED 25,000 |
| Reusing already-used marks | AED 50,000 |
| Failing to return unused marks to the authority on time | AED 50,000 |
Which Goods Are Classified as Excise Goods?
Knowing which products fall within excise tax scope is the starting point for avoiding penalties in the first place, since a business unaware its products are excisable is exposed to every penalty category above without realising it.
The UAE’s excise goods list includes energy drinks, carbonated drinks, tobacco and tobacco products, sweetened drinks, electronic smoking tools and devices, and liquids used in electronic smoking tools and devices.
Products in these categories carry excise tax obligations regardless of the size of the business handling them, and there is no minimum threshold that exempts a small operation from registration and compliance once it deals in even one of these categories.
How to Avoid Excise Tax Penalties
Most excise tax penalties trace back to a small number of avoidable causes: registering late or not at all, missing the monthly filing and payment deadlines, keeping incomplete records, or misunderstanding the marking requirements that apply to tobacco products specifically.
Businesses handling excisable goods for the first time should confirm their exact classification and registration obligation before commencing activity, rather than assuming a small volume of trade falls outside scope.
Ongoing compliance depends on treating registration, monthly filing, record-keeping, and marking requirements as a connected system rather than separate tasks handled reactively, since a gap in one area, such as poor record-keeping, often surfaces as a penalty in a different category, such as an inaccurate filing built on incomplete data.
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