The Two Building Blocks: Excise Price and Tax Rate
Every UAE excise tax calculation has two inputs: the excise price and the applicable tax rate. The formula is straightforward:
Excise Tax Payable = Excise Price × Tax Rate
The excise price is the base value against which the rate is applied. It is not simply the retail selling price of the product. Determining the correct excise price is therefore the most technical part of any excise tax calculation. Once the excise price is correctly established, applying the tax rate to arrive at the tax payable is mechanical.
Excise Tax Rates by Product Category
The following tax rates apply to each category of excise goods under the UAE excise tax framework established by Cabinet Resolution No. 52 of 2019 and confirmed by Cabinet Decision No. 99 of 2025:
| Excise Good | Tax Rate |
|---|---|
| Tobacco and tobacco products (including heated tobacco) | 100% |
| Electronic smoking devices and tools | 100% |
| Liquids used in electronic smoking devices and tools | 100% |
| Energy drinks | 100% |
| Carbonated drinks | 50% |
| Sweetened drinks | 50% (ad valorem) or tiered per-litre rate where the volumetric model applies |
Where a product meets the definition of more than one excise goods category, Cabinet Decision No. 99 of 2025 requires it to be classified under the category carrying the highest applicable tax rate.
Also Check: Excise Tax Consultation Services
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How the Excise Price Is Determined
The excise price is the higher of two values:
- The price published by the FTA in its Standard Price List for the relevant excise good, where one exists. The FTA maintains a standard price list for tobacco products and certain other categories. Where a product appears on this list, the published price sets the minimum excise price regardless of what the actual retail price is.
- The designated retail sales price excluding the excise tax already embedded in it. Where no standard price list applies, or where the retail price is higher than the listed price, the excise price is the retail price after removing the embedded excise tax component.
The excise price is always the higher of these two values, ensuring that the tax base cannot be artificially reduced by setting a below-market retail price.
Also Check: Excise Tax Registration Services
Deriving the Excise Price From the Retail Sales Price
Where the retail price is used as the basis for the excise price calculation, the embedded excise tax must be removed to arrive at the pre-tax excise price. The formula differs by tax rate.
For Goods Taxed at 100% (Tobacco, Energy Drinks, Electronic Smoking Devices and Liquids)
Since the excise tax equals 100% of the excise price, the tax embedded in the retail price equals half the retail price.
Excise Tax = 1/2 × Retail Price
Excise Price = Retail Price − Excise Tax = Retail Price − (1/2 × Retail Price) = 1/2 × Retail Price
Worked example: A pack of cigarettes has a designated retail price of AED 20. The excise price is 1/2 × AED 20 = AED 10. The excise tax payable is 100% × AED 10 = AED 10. Total retail price of AED 20 = Excise Price (AED 10) + Excise Tax (AED 10).
For Goods Taxed at 50% (Carbonated Drinks and Sweetened Drinks)
Since the excise tax equals 50% of the excise price, the tax embedded in the retail price equals one-third of the retail price.
Excise Tax = 1/3 × Retail Price
Excise Price = Retail Price − Excise Tax = Retail Price − (1/3 × Retail Price) = 2/3 × Retail Price
Worked example: A carbonated drink has a designated retail price of AED 3. The excise price is 2/3 × AED 3 = AED 2. The excise tax payable is 50% × AED 2 = AED 1. Total retail price of AED 3 = Excise Price (AED 2) + Excise Tax (AED 1).
Excise Price for Concentrates, Powders, Gels, and Extracts
For concentrates, powders, gels, or extracts used to make excise goods, the excise price cannot be derived from a retail price in the standard way because the concentrate itself is not sold to the final consumer at a single identifiable price. In these cases, the excise price is calculated based on the recommended retail selling price of the end product that the concentrate will produce, as identified by the importer or producer. VAT is excluded from this calculation. This approach ensures that the excise tax on concentrates reflects the tax that would have been payable on the finished products they generate.
The Two Calculation Methods Under UAE Excise Tax
Federal Decree-Law No. 7 of 2025 (effective 1 October 2025) formalised two methods for calculating excise tax, allowing the applicable method to be set by Cabinet decision for each category of goods:
Ad Valorem Method
The ad valorem method calculates excise tax as a percentage of the excise price. All currently taxable excise goods in the UAE are subject to ad valorem rates (100% or 50% as above). This is the standard calculation method, and the examples above illustrate how it works in practice.
Specific (Volumetric) Method
The specific method calculates excise tax as a fixed amount per unit of measurement, regardless of price. This method is particularly relevant following the Ministry of Finance announcement in December 2025 of a tiered per-litre rate for sweetened beverages.
Under the tiered volumetric model for sweetened beverages announced in December 2025:
- Beverages containing 5 grams or more but less than 8 grams of sugar per 100 millilitres: AED 0.79 per litre
- Beverages containing 8 grams or more of sugar per 100 millilitres: a higher per-litre rate (to be confirmed in the implementing cabinet decision)
Under this model, excise tax on sweetened beverages is calculated by multiplying the applicable per-litre rate by the volume of the product, rather than by applying a percentage to the excise price. A one-litre bottle of a sweetened drink containing 6 grams of sugar per 100 millilitres would attract excise tax of AED 0.79, regardless of its retail price.
Businesses importing or producing sweetened beverages should monitor the finalised implementing cabinet decision for the confirmed volumetric rates and begin reviewing their pricing and labelling compliance for the new calculation method.
Practical Calculation Summary Table
| Product | Method | Retail Price (AED) | Excise Price (AED) | Tax Rate | Excise Tax (AED) |
|---|---|---|---|---|---|
| Cigarettes (1 pack) | Ad valorem | 20.00 | 10.00 | 100% | 10.00 |
| Energy drink (250ml) | Ad valorem | 6.00 | 3.00 | 100% | 3.00 |
| Carbonated drink (330ml) | Ad valorem | 3.00 | 2.00 | 50% | 1.00 |
| Sweetened drink (1L, 6g sugar/100ml) | Volumetric (Dec 2025 model) | N/A | N/A | AED 0.79/litre | 0.79 |
| Electronic cigarette device | Ad valorem | 150.00 | 75.00 | 100% | 75.00 |
Excise Tax on Imported vs Domestically Produced Goods
The calculation method is the same whether goods are imported or domestically produced, but the point at which the tax becomes payable differs. For importers, excise tax is calculated on the excise price at the point of import and is settled through the EmaraTax monthly return (for registered importers) or before customs clearance (for non-registered importers). For domestic producers, the tax is calculated on the excise price at the point the goods are released for consumption and is included in the monthly excise tax return filed by the 15th of the following month.
Frequently Asked Questions (FAQs)
What is the excise price and how is it different from the retail price?
How do you calculate the excise tax on a product taxed at 100%?
How do you calculate the excise tax on a product taxed at 50%?
What is the new tiered calculation for sweetened beverages in the UAE?
How is excise tax calculated on concentrates and powders used to make excise goods?
Need Expert Advice?
Contact the team at Farahat & Co. for professional support and expert insights for businesses operating in the UAE.
How Farahat & Co. Can Help
Farahat & Co. assists businesses across the UAE with excise tax calculations, excise price determinations, EmaraTax return preparation, and compliance with the updated tiered sweetened beverage model. As an FTA-registered Tax Agent, our team ensures excise tax is calculated accurately and returns are filed by the monthly deadline.
Contact Farahat & Co. today to discuss your excise tax calculation and compliance requirements.
