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UAE Excise Tax Fundamentals/Calculating and Filing Excise Tax Returns
10 min

Excise Price and Tax Calculation

Learn how excise price is determined and how to calculate the excise tax due on different products.

Excise Price and Tax Calculation

Calculating excise tax requires understanding the concept of excise price — the base amount on which the tax rate is applied.

What is the excise price?

The excise price is the price a producer or importer sells the product for in the open market, excluding excise tax but including other taxes (like customs duties). It is essentially the retail price minus the excise tax.

There are two main methods for determining the excise price:

1. Retail price method (standard approach) When the retail price (the final price to the consumer) is known:

  • Excise price = Retail price ÷ (1 + excise tax rate)
  • Excise tax = Retail price - Excise price = Excise price × excise tax rate

2. Standard price approach When there is no established retail price (e.g., the product is sold B2B and not directly to consumers):

  • The FTA may determine a standard price for the product category
  • Excise tax = Standard price × excise tax rate

Calculation examples

Example 1: Carbonated drink (50% rate) A retailer sells a can of soda for AED 6.00 (retail price, including excise tax).

  • Excise price = 6.00 ÷ (1 + 0.50) = 6.00 ÷ 1.50 = AED 4.00
  • Excise tax = 6.00 - 4.00 = AED 2.00
  • Or: Excise tax = 4.00 × 50% = AED 2.00

Example 2: Energy drink (100% rate) A retailer sells an energy drink for AED 15.00 (retail price, including excise tax).

  • Excise price = 15.00 ÷ (1 + 1.00) = 15.00 ÷ 2.00 = AED 7.50
  • Excise tax = 15.00 - 7.50 = AED 7.50
  • Or: Excise tax = 7.50 × 100% = AED 7.50

Example 3: Tobacco products (100% rate) A pack of cigarettes sells for AED 20.00 (retail price, including excise tax).

  • Excise price = 20.00 ÷ (1 + 1.00) = 20.00 ÷ 2.00 = AED 10.00
  • Excise tax = 10.00 × 100% = AED 10.00

Excise tax and VAT

Excise tax is calculated first. VAT at 5% is then calculated on the final retail price (which already includes excise tax).

Using Example 1 (soda at AED 6.00):

  • Excise tax = AED 2.00 (already included in the AED 6.00)
  • VAT = 6.00 × 5% = AED 0.30
  • Total price to consumer = AED 6.30

Important notes

  • The excise price must be the open market price — you cannot artificially lower it to reduce tax.
  • If you sell to a related party, the FTA may adjust the price to reflect market value.
  • Promotional discounts do not reduce the excise price — the tax is based on the standard retail price.
  • For imported goods, the excise price includes customs duties but excludes excise tax and VAT.

Draft note: Excise price determination rules are complex. Always verify calculations against FTA guidance and consult a qualified UAE tax professional.

Practical UAE example

**Scenario: Calculating excise tax for a beverage import** Sara imports a shipment of 10,000 cans of sweetened juice. The standard retail price per can is AED 4.00. **Step 1: Determine the excise price** - Excise rate for sweetened drinks = 50% - Excise price = 4.00 ÷ (1 + 0.50) = 4.00 ÷ 1.50 = AED 2.667 per can **Step 2: Calculate excise tax per unit** - Excise tax = 2.667 × 50% = AED 1.333 per can **Step 3: Calculate total excise tax** - Total excise tax = 1.333 × 10,000 = AED 13,333.33 **Step 4: Calculate VAT on the retail price** - VAT = 4.00 × 5% = AED 0.20 per can - Total VAT = 0.20 × 10,000 = AED 2,000.00 **Summary:** - Retail price (incl. excise, excl. VAT): AED 4.00 per can - Excise tax: AED 1.333 per can (AED 13,333.33 total) - VAT: AED 0.20 per can (AED 2,000.00 total) - Final price to consumer (incl. all taxes): AED 4.20 per can Sara must pay AED 13,333.33 in excise tax when she imports the shipment, and AED 2,000.00 in VAT on her supply.

Key takeaways

  • Excise price = Retail price ÷ (1 + excise tax rate).
  • Excise tax = Excise price × excise tax rate.
  • VAT at 5% is calculated on the final retail price (which already includes excise tax).
  • The excise price must reflect the open market price — it cannot be artificially reduced.
  • Promotional discounts do not reduce the excise price — the standard retail price is used.

Authoritative sources

Cabinet Decision No. 38 of 2017 on Excise Goods, Substances and Tax Rates

UAE Cabinet · Cabinet Decision No. 38 of 2017

View source

FTA Excise Tax Guides and Public Clarifications

Federal Tax Authority (FTA) · FTA Excise Tax Guides (EXTP1, EXTP2, EXTP3 series)

View source
Knowledge check

1. A can of soda (50% excise rate) retails for AED 6.00 including excise tax but excluding VAT. What is the excise tax per can?

2. An energy drink (100% excise rate) retails for AED 20.00 including excise tax. What is the excise price?

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This lesson is general educational content, not individualized tax or legal advice. Always consult a qualified professional for your specific situation.