The Federal Tax Authority has set a minimum taxable value of AED 1 per millilitre on e-cigarette liquids. Where the retail selling price is lower, the tax is still calculated on that minimum. The rate stays at 100% and is not being changed.
What happened
The Federal Tax Authority (FTA), the UAE's federal tax administration, announced on 6 August 2026 that from 1 September 2026 excise tax on liquids for electronic smoking devices will be calculated on a minimum value of AED 1 per millilitre (roughly USD 0.27). Excise tax is the indirect tax the UAE applies to tobacco, sweetened beverages, energy drinks and vaping products. The rate remains 100% of the taxable value and is not being amended: what changes is the base to which that percentage is applied. The minimum prices already in force for cigarettes, waterpipe tobacco and ready-to-use tobacco products are unchanged.
What changes in practice
Until 31 August 2026 excise is calculated on the declared retail selling price. From 1 September 2026, where that price falls below the minimum, the tax is calculated on the minimum instead. A worked example: a 60 ml bottle sold at AED 40 (about USD 11) is taxed as though it cost AED 60 (about USD 16). The effect concentrates on the lower end of the market, products sold below AED 1 per millilitre; where a product already sits above that threshold, the calculation does not change. Operationally, the tax computation in excise returns needs to be revised and, where margin will not absorb the difference, so does the price list.
Who it applies to
To UAE companies that import, distribute or resell liquids for electronic cigarettes, including e-commerce operators selling into the UAE. It is a narrow category and does not touch businesses outside it. It does apply in full to any company holding a trading licence covering this product line, and for those companies it affects margin from September sales onwards.
The exposure
The practical exposure is continuing to account for excise on the actual price rather than on the minimum, producing a tax shortfall that accumulates invoice by invoice and surfaces on audit together with penalties. The enforcement context is not theoretical: in the first six months of 2026 the Federal Tax Authority carried out approximately 103,680 inspection visits, 21% more than the same period of 2025, with AED 174 million in tax and penalties linked to 8.5 million non-compliant excise products seized. Excise goods are precisely where those inspections concentrate.
What to do now
Businesses in this sector have only days. Before 1 September 2026, extract the list of product codes with a declared price below AED 1 per millilitre and recalculate excise on those lines using the new minimum base. Then update the figure in the invoicing system, so that September sales are raised with the correct tax from the outset, and rework the margin on each affected line to decide whether the price list still holds. Anyone holding stock purchased before September should confirm which treatment applies to sales made after that date.
Sources
- https://tax.gov.ae/en/media.centre/news.aspx
- https://www.thenationalnews.com/news/uae/2026/08/06/uae-to-introduce-minimum-taxation-price-for-e-cigarette-and-vape-liquids-from-september-1/
Published 27 August 2026 on the basis of public sources and official United Arab Emirates instruments. This is not legal or tax advice. Verify your position with a qualified professional before acting.