Introduction

Businesses operating in the UAE vaping industry should prepare for an important change to the excise-tax framework taking effect on 1 September 2026.

From that date, a minimum excise price of AED 1 per millilitre will apply to liquids used in electronic smoking devices and tools when determining the excise tax payable.

The change has been described in some reports as a “vape tax increase”. However, the distinction is important: the existing 100% excise tax rate on electronic smoking devices and their liquids is not itself being increased. Instead, the new measure introduces a minimum value that may affect the amount on which excise tax is calculated.

For businesses importing, manufacturing, distributing or selling vape liquids in the UAE, understanding this distinction is essential for tax planning and compliance.

What Is Changing From 1 September 2026?

Vape liquids have been subject to UAE excise tax since the expansion of the excise-tax regime in 2019. Electronic smoking devices and the liquids used in them are generally subject to a 100% excise tax rate.

The new rule introduces a minimum excise price of AED 1 per millilitre for relevant vape liquids.

For example:

These amounts should not be understood as an automatic additional retail charge.

Instead, they represent the minimum value used for the relevant excise-tax calculation. The actual commercial impact will depend on the product, its existing value and the way the applicable excise tax is calculated.

Is the UAE Increasing the Vape Tax Rate?

No. The 100% excise tax rate is not being increased by this particular change.

The significant change is the introduction of a minimum excise-price threshold.

This means businesses should distinguish between:

• the excise tax rate, which remains 100%; and
• the value used to calculate the tax, which may be affected by the new AED 1-per-millilitre minimum.

This distinction is particularly important for businesses selling lower-priced vape liquids or products in high volumes.

How Could the New Rule Affect Vape Businesses?

The financial impact will depend on how a business currently values and prices its products for excise-tax purposes.

Where the applicable value of a vape liquid would otherwise fall below the new minimum, the AED 1-per-millilitre floor may increase the taxable amount.

Consequently, businesses could experience higher excise-tax costs on certain products even though the headline tax rate remains unchanged.

For businesses with large inventories or significant sales volumes, even a relatively small increase in the tax calculation per product can have a material impact on overall costs.

Could Vape Products Become More Expensive?

They could, but the new rule does not directly establish retail prices.

If a business incurs additional excise-tax costs because of the new minimum, it will need to decide how to manage that additional cost.

Depending on the commercial arrangements, businesses may:

• absorb the additional cost;
• increase wholesale prices;
• adjust distributor pricing;
• revise retail prices; or
• restructure product pricing and margins.

Therefore, consumers may see price increases for some products, but it would be inaccurate to suggest that all vape products in the UAE will automatically become more expensive from 1 September 2026.

The impact will vary depending on product volume, pricing, tax treatment and the commercial decisions made by businesses.

Which Businesses Should Review Their Position?

The change is particularly relevant to businesses involved in:

• importing vape liquids into the UAE;
• manufacturing electronic smoking products;
• distributing vape liquids;
• wholesaling vaping products;
• retailing vape products; and
• managing excise-tax registrations and declarations.

Businesses should consider reviewing their product portfolio rather than applying a single approach to all vape products.

Key Areas Businesses Should Review

Before the new rule takes effect, businesses should review several areas of their operations.

1. Product Pricing

Businesses should identify products that may be affected by the AED 1-per-millilitre minimum and assess whether their existing pricing structure remains commercially viable.

2. Product Volumes

The quantity of liquid contained in each product will become particularly important because the minimum is linked to millilitres.

Businesses should ensure that product-volume information is accurate and consistently recorded.

3. Excise-Tax Calculations

Existing tax calculations should be reviewed to determine whether the new minimum could change the taxable amount for individual products.

4. Inventory

Businesses holding significant quantities of vape liquids should consider how the new rules may affect existing inventory and future imports.

5. Import and Customs Documentation

Product descriptions, quantities, values and supporting documentation should be accurate and consistent across relevant commercial, customs and tax records.

6. Accounting and Tax Systems

Accounting and tax systems should be capable of applying the revised calculation consistently and producing appropriate records for tax reporting.

7. Commercial Agreements

Businesses should also examine agreements with suppliers, distributors and retailers.

Clauses dealing with taxes, duties, government charges and regulatory changes should be reviewed to determine which party bears any additional tax burden.

What Should Businesses Do Before 1 September 2026?

Businesses should not wait until their first affected tax return to consider the implications of the new rule.

A practical compliance review could include the following steps:

Step 1: Prepare a complete list of vape-liquid products currently imported, manufactured or sold.

Step 2: Record the volume of each product in millilitres.

Step 3: Review the current excise-tax treatment and applicable values.

Step 4: Identify products that could fall below the new AED 1-per-millilitre minimum.

Step 5: Assess the potential financial impact on margins and pricing.

Step 6: Review supplier and distributor agreements for tax-allocation provisions.

Step 7: Update accounting and tax-reporting processes where necessary.

Step 8: Ensure relevant employees and finance teams understand the revised calculation.

Taking these steps before implementation can help businesses reduce the risk of unexpected tax liabilities and compliance problems.

What Does the Change Mean for Consumers?

For consumers, the most visible potential consequence is a change in retail prices.

However, the new rule does not mean that every vape product will automatically increase in price on 1 September 2026.

The impact will depend on:

• the volume of the vape liquid;
• the product's existing value;
• the applicable excise-tax calculation;
• the business's profit margins; and
• whether additional costs are passed on to customers.

Consumers should therefore expect that the effect may differ between products and businesses.

Part of the UAE's Evolving Excise-Tax Framework

The latest change forms part of the UAE's broader approach to excise taxation, where minimum-price or minimum-value concepts can play an important role in determining the tax treatment of certain excise goods.

Electronic smoking devices and their liquids have been subject to a 100% excise tax since 2019. The introduction of a minimum excise price for vape liquids demonstrates that businesses need to consider not only the applicable tax rate but also the value on which the tax is calculated.

For businesses, the more useful question is therefore not simply:

“Has the excise-tax rate increased?”

The more important question is:

“Will the new minimum excise price increase the amount of excise tax payable on our products?”

That assessment should be made before the new rules take effect.

How Concept Lawyers Can Help

Regulatory and tax changes can affect a business far beyond its tax return. They can influence pricing, contracts, inventory management, commercial relationships and overall compliance strategy.

At Concept Lawyers, our team can assist businesses in assessing the legal and commercial implications of UAE regulatory and tax developments, including:

• excise-tax compliance;
• commercial contract reviews;
• regulatory obligations;
• allocation of tax liabilities;
• business risk management; and
• legal implications of changes in UAE regulations.

Businesses involved in the importation, distribution, manufacture or sale of vaping products in the UAE should consider reviewing their position before 1 September 2026.

Conclusion

The UAE's new AED 1-per-millilitre minimum excise price represents an important change for businesses operating in the vaping sector.

While the 100% excise-tax rate remains unchanged, the new minimum may increase the taxable value of certain vape liquids and, consequently, the excise tax payable.

Businesses should review their product pricing, volumes, inventory, tax calculations, accounting systems and commercial agreements before the new rule comes into effect.

Early preparation can help businesses identify potential additional costs, improve compliance and avoid unexpected tax issues.

Disclaimer: This article is provided for general informational purposes only and does not constitute legal or tax advice. The application of UAE excise tax depends on the specific facts, products, transactions and activities of each business, as well as the legislation and regulatory guidance applicable at the relevant time. Businesses should obtain professional legal or tax advice based on their individual circumstances.ere...