UAE Tax Changes: New Excise Pricing and Corporate Tax Reporting Rules Take Effect

The United Arab Emirates is introducing two significant federal tax changes in the coming months, requiring affected businesses to review their pricing, accounting and compliance procedures ahead of the new implementation dates.

The first measure concerns electronic smoking products and will take effect on September 1, 2026. Under the new rules, a minimum excise price of AED1 per millilitre will apply to liquids used in electronic smoking devices.

The second measure concerns corporate tax and financial reporting requirements. From October 1, 2026, businesses covered by the updated rules will need to ensure their accounting systems and financial records can support revised audited financial statement requirements.

Together, these UAE tax changes are expected to affect importers, manufacturers, distributors, retailers, Free Zone businesses and companies operating through multiple UAE entities.

New UAE tax changes for electronic smoking liquids from September

One of the most immediate changes will affect suppliers and businesses dealing in electronic smoking liquids.

Under Cabinet Decision No. 137 of 2026, the UAE has introduced a minimum excise price of AED1 per millilitre for liquids used in electronic smoking devices. The measure becomes effective on September 1, 2026, following the announcement by UAE authorities on August 6.

Electronic smoking liquids will continue to be subject to a 100 per cent excise tax rate. Cabinet Decision No. 197 of 2025 confirms the 100 per cent rate for electronic smoking liquids as well as electronic smoking devices.

The new minimum excise price means businesses cannot calculate the excise liability solely on the basis of a lower actual product value where that value falls below the prescribed minimum.

For example, a 60 millilitre bottle would have a minimum excise base of AED60 under the new AED1-per-millilitre requirement. The applicable 100 per cent excise rate would then be applied to the relevant excise value.

This change is particularly important for lower-priced electronic smoking liquids, where the new minimum value could increase the taxable base.

Importers, manufacturers and retailers face pricing adjustments

Importers, manufacturers, distributors and retailers dealing with electronic smoking products will need to review their product databases and pricing structures before the September 1 effective date.

Businesses should identify products where the existing excise value is below AED1 per millilitre and determine how the new minimum will affect their tax calculations.

Inventory management will also become important. Retailers holding products with excise values below the new minimum may need to reassess their pricing and tax records to ensure that transactions remain compliant after the new rules come into force.

Businesses should also review product classifications, packaging sizes and transaction records because the minimum pricing requirement is calculated on a per-millilitre basis.

The UAE authorities have positioned the measure as part of broader efforts to standardise excise tax treatment across tobacco and electronic smoking categories while strengthening compliance and reducing practices that could weaken effective tax collection.

The Federal Tax Authority’s existing guidance continues to classify electronic smoking liquids and electronic smoking devices within the UAE excise tax framework at the 100 per cent rate.

Corporate tax reporting requirements change from October

The second major element of the UAE tax changes concerns financial reporting and audited financial statements.

Ministerial Decision No. 84 introduces revised rules that replace earlier audit requirements for tax periods beginning on or after January 1, 2025. Provisions applicable to tax periods beginning before that date continue to apply under the earlier framework.

For taxable persons that are not part of a tax group, audited financial statements are required when revenue exceeds AED50 million during the relevant tax period.

This threshold means businesses approaching AED50 million in revenue need to closely monitor their financial performance throughout the year rather than waiting until the end of the reporting period.

Accurate revenue recognition, reconciliation and documentation will therefore become increasingly important for corporate tax compliance.

Qualifying Free Zone Persons face additional requirements

The rules are particularly significant for Qualifying Free Zone Persons.

Qualifying Free Zone Persons are required to prepare and maintain audited financial statements regardless of whether they cross the AED50 million revenue threshold.

This creates a separate compliance consideration for Free Zone businesses. A company cannot assume that remaining below the AED50 million threshold will automatically remove its audit obligation if it qualifies as a Qualifying Free Zone Person.

Businesses operating in Free Zones should therefore establish whether they meet the conditions for Qualifying Free Zone Person status and identify the corresponding financial reporting requirements.

The distinction is especially important for companies with complex structures involving Free Zone entities, mainland companies and tax groups.

Additional rules for Free Zone distribution businesses

Qualifying Free Zone Persons involved in the distribution of goods or materials in or from a Designated Zone face additional procedural requirements.

Businesses operating under the Corporate Tax Free Zone regime will need to maintain accounting records that clearly demonstrate their qualifying activities and Designated Zone transactions.

This includes maintaining transaction-level evidence covering relevant goods, counterparties and revenue streams.

For distribution businesses, the quality of supporting documentation can therefore become just as important as the underlying transaction itself.

Finance teams should ensure that their accounting systems can distinguish qualifying and non-qualifying activities and provide a clear audit trail for transactions conducted through Designated Zones.

Multi-entity businesses need stronger accounting controls

Businesses operating through multiple UAE entities will also need to pay close attention to the new reporting environment.

Companies with mainland entities, Free Zone entities and tax-group structures should determine the status and obligations of each individual entity before deciding whether audited financial statements are required.

Consistent transaction classification, reconciliation and corporate tax records will be particularly important where several companies are connected through a broader business structure.

Finance teams should establish clear processes for identifying revenue, recording intercompany transactions and maintaining supporting documentation.

Businesses approaching the AED50 million revenue threshold should also monitor revenue throughout each reporting period so they can determine in advance whether an audit requirement will arise.

Non-resident businesses also fall within the framework

The revised rules also address revenue calculations for non-resident persons.

For these businesses, relevant revenue calculations can include income derived through UAE permanent establishments or UAE nexuses.

Non-resident businesses with UAE activities should therefore assess how their UAE-generated income interacts with the applicable corporate tax and financial reporting requirements.

This is particularly relevant for international companies that maintain a UAE presence without operating through a conventional UAE-headquartered business structure.

What businesses should do before the new UAE tax changes take effect

The September and October deadlines give businesses limited time to review their internal systems.

Companies affected by the excise changes should first review all electronic smoking liquids and identify products that currently have an excise value below AED1 per millilitre.

They should then update product records, pricing calculations and tax systems to reflect the new minimum excise price from September 1.

Businesses affected by the corporate tax changes should review their revenue levels, Free Zone status and tax-group arrangements. They should also determine whether audited financial statements are required and ensure their accounting records can withstand an audit.

Companies should additionally review their transaction documentation, revenue recognition procedures and reconciliation processes.

For Free Zone distribution businesses, particular attention should be given to evidence supporting qualifying activities and Designated Zone transactions.

Compliance planning becomes increasingly important

The latest UAE tax changes underline the country’s continuing move toward more structured tax administration and financial transparency.

For businesses, the impact goes beyond simply calculating tax. The new requirements affect pricing, inventory management, accounting systems, financial reporting, audit preparation and corporate tax filing processes.

Companies approaching statutory thresholds should not wait until year-end to determine whether they have crossed the relevant revenue level. Similarly, Free Zone businesses should establish their compliance obligations based on their precise corporate tax status and activities.

With the electronic smoking product rules beginning on September 1 and the revised financial reporting requirements taking effect from October 1, affected businesses should use the weeks ahead to review their systems and documentation.

For UAE companies, importers, manufacturers, retailers, distributors and Free Zone operators, early preparation can help reduce compliance risks and ensure that tax calculations and financial reporting remain aligned with the latest federal requirements.