GCC excise tax rates compared by country

GCC excise tax rates compared

GCC excise tax rates are a set of national taxes on tobacco, energy drinks and sweetened beverages, layered on top of any VAT that also applies, and charged at rates far higher than any GCC VAT rate. As of September 2026 five of the six Gulf states have implemented excise tax, largely on the same 100 percent and 50 percent pattern; Kuwait has signed the GCC agreement but not implemented it.

The pattern has also just changed: Saudi Arabia and the UAE both replaced their flat rate on sweetened beverages with a tiered, sugar-content-based system effective 1 January 2026, which means the rate on the same shelf category can now differ by recipe, not just by country.

The 100 and 50 percent pattern across five states

Tobacco and energy drinks carry a 100 percent excise rate in every implementing state, and carbonated or soft drinks generally carried 50 percent before the 2026 changes described below.

• Saudi Arabia: tobacco products and e-cigarette devices/liquids 100 percent, energy drinks 100 percent, soft drinks 50 percent (law effective 11 June 2017; sweetened beverages moved to sugar-content tiers from 1 January 2026)
• United Arab Emirates: tobacco, energy drinks and electronic smoking devices/liquids each 100 percent (tobacco/energy effective 1 October 2017, e-cigarette items added 1 December 2019); sweetened drinks moved to sugar-content tiers from 1 January 2026
• Qatar: tobacco products, energy drinks and special-purpose goods such as alcohol and pork items each 100 percent, carbonated drinks (excluding unflavoured aerated water) 50 percent, effective 1 January 2019
• Bahrain: tobacco 100 percent, energy drinks 100 percent, soft or carbonated sweetened drinks 50 percent, effective 30 December 2017
• Oman: tobacco, pork products, alcoholic beverages and energy drinks each 100 percent, carbonated drinks 50 percent, and sugar-sweetened beverages 50 percent from 1 October 2020, effective from 15 June 2019
• Kuwait: no excise tax implemented as of September 2026, despite signing the GCC Common Excise Tax Agreement

The 2026 shift: sugar-content tiers replace the flat sweetened-drink rate

Saudi Arabia replaced its flat 50 percent rate on sweetened beverages with a four-tier, sugar-content-based methodology effective 1 January 2026: no tax for an artificially sweetened drink with no added sugar, no tax for under 5 grams of sugar per 100ml, SAR 0.79 per litre for 5 to 7.99 grams per 100ml, and SAR 1.09 per litre for 8 grams or more per 100ml.

The UAE made an equivalent change the same day under Cabinet Decision No. 197 of 2025: the flat 50 percent rate was replaced by a volumetric, sugar-content model at AED 0 per litre under 5 grams of sugar per 100ml, AED 0.79 per litre for 5 to under 8 grams, and AED 1.09 per litre for 8 grams or more; carbonated drinks are no longer a separate excise category in the UAE and are now taxed strictly on sugar content under this same model. Exemptions include 100 percent natural juices with no added sugar or sweeteners, milk and milk-based products, and approved medical or dietary beverages. Oman's sugar-sweetened-beverage rate, by contrast, is still a flat 50 percent, and Qatar and Bahrain still tax carbonated or sweetened drinks at a flat 50 percent as well; only Saudi Arabia and the UAE have moved to the tiered model as of September 2026.

Kuwait: signed but not implemented

Kuwait signed the GCC Common Excise Tax Agreement but has not implemented excise tax domestically as of September 2026; PwC's tax summary states plainly that there are no excise taxes in Kuwait. Proposed excise taxes on tobacco, sugary and energy drinks, and luxury goods such as watches, jewellery, vehicles and yachts remain under government discussion, with rates reportedly considered in the region of 10 to 25 percent, but neither the rates nor a timeline are confirmed by an official source, so treat any specific Kuwaiti excise figure as unconfirmed until the government legislates it.

A Kuwait-based distributor that also operates in Saudi Arabia, Bahrain, Qatar or Oman still meets excise tax the moment goods cross into one of those states, even while its own Kuwaiti operation stays untouched by it; the absence of a Kuwaiti excise law is a fact about Kuwait, not a reason to assume the same goods are excise-free everywhere the group trades.

Who has to register

Registration falls on the businesses that bring excisable goods into the supply chain, not on the retailers that sell them to the public. Saudi Arabia and Qatar both require manufacturers and importers of excisable goods to register, Qatar extending the duty to tax-warehouse operators as well, and Bahrain and the UAE apply the same manufacturer-and-importer principle through their own tax authorities. A retailer selling a taxed can of energy drink off the shelf is not itself an excise registrant; the tax was already applied further up the chain, at production or import.

This is the opposite pattern to VAT, where almost every business above the threshold registers regardless of what it sells. A distributor that only ever buys excisable goods from an already-registered local manufacturer, and never imports them directly, can go through an entire trading relationship without ever needing its own excise registration, even though excise cost is embedded in every purchase it makes.

Excise in the cost, VAT as a pass-through

Excise tax and VAT sit in different places in a business's accounts, and confusing the two is the single most common excise mistake. VAT is a pass-through: a registered business charges it, collects it, and remits the net of output and input VAT to the tax authority, so VAT should never sit inside the cost of inventory or the cost of goods sold. Excise tax, charged at import or manufacture, behaves differently: unless a specific refund or exemption applies, it becomes part of the landed cost of the goods, flowing into inventory value and then into cost of goods sold when the item is sold.

The two taxes also interact directly, because VAT in a GCC excise state is normally calculated on a price that already includes excise, a cascading calculation rather than two taxes computed independently on the same net price. A tax-rate configuration that only knows how to apply VAT on the pre-excise price will understate VAT due on every excisable sale.

For pricing purposes this also changes what a discount or a promotion actually costs a business: cutting the customer-facing price of an excisable product does not reduce the excise already baked into its landed cost, so the margin absorbed by a promotion on tobacco or an energy drink is larger, proportionally, than the same percentage discount on a non-excisable product.

Worked example: excise cascading into VAT

A Saudi beverage distributor imports 1,000 litres of a reformulated soft drink that tests at 8.5 grams of sugar per 100ml, placing it in Tier 4. The base cost of the shipment is SAR 3,000. Excise at SAR 1.09 per litre on 1,000 litres is SAR 1,090, bringing the excise-inclusive cost to SAR 4,090. VAT at 15 percent is then calculated on that SAR 4,090 base, giving SAR 613.50 of VAT, and a total landed invoice of SAR 4,703.50.

The excise, SAR 1,090, sits inside the inventory cost of the shipment and will flow into cost of goods sold as the stock is sold. The VAT, SAR 613.50, is recoverable input tax and never touches inventory at all: it is a receivable from the tax authority, not a cost of the goods.

• Cost 3,000 + excise (1,000 L x SAR 1.09) 1,090 = excise-inclusive base 4,090
• VAT 15% on 4,090 = 613.50
• Total payable to the supplier/customs: 4,090 + 613.50 = 4,703.50
• Journal: Dr Inventory 4,090 / Dr VAT recoverable 613.50 / Cr Accounts payable 4,703.50

Stock and margin implications of sugar-tier excise

Before 2026, a soft drink's excise rate was fixed by its category, so every case of the same product cost the same amount of excise no matter when it was imported. A sugar-content tier system breaks that assumption: two batches of what looks like the same product can sit in different tiers if a manufacturer reformulates the recipe, which means the excise cost, and therefore the landed cost and the margin, can differ batch by batch even under one product code.

This makes lot-level cost tracking, not category-level assumptions, the safer basis for margin reporting on any product affected by the sugar tiers in Saudi Arabia or the UAE. A business that still prices and margins by product category rather than by the actual landed cost of the lot in stock risks reporting a margin that was accurate for last year's flat-rate world and is no longer accurate for this year's tiered one.

Common excise mistakes

Most excise problems trace back to treating it like a second VAT, when it behaves quite differently in the accounts.

• Applying a flat 50 percent sweetened-drink rate in Saudi Arabia or the UAE after the 1 January 2026 move to sugar-content tiers
• Calculating VAT on the pre-excise price instead of the excise-inclusive price, understating VAT due
• Treating excise as a pass-through and excluding it from inventory cost, which overstates gross margin
• Assuming a Kuwaiti group entity is excise-free everywhere it trades, rather than only within Kuwait itself
• Costing every batch of a sugar-tiered product at the same rate, instead of tracking the tier that batch actually tested into

GCC excise tax and Skyline Nexus ERP

A Skyline Nexus ERP tax rate can be flagged Calculated Before VAT (Cascading), which is exactly the setting an excise-type tax needs so that VAT is computed on the excise-inclusive price rather than on the pre-excise cost, matching the worked example above. Tax rates also carry a tax category of VAT or Excise / Duty and can store an exemption code, so a business can hold its excise rates and its VAT rate side by side in the same tax-rate list rather than approximating one tax with the other.

Stock is costed on a FIFO or LIFO basis, chosen per business under Business Settings, so a shipment landed at a specific excise-inclusive cost is tracked lot by lot and consumed in that order; the Stock Valuation Report and the FIFO/LIFO Inventory Valuation Report under Inventory Control Centre make each lot's landed cost visible rather than blended into a single average. Kuwait excise tax, if and when it is legislated, is added as a new tax rate the same way any GCC excise rate is: there is no separate module to wait for.