30 per cent municipal tax suspended on alcoholic beverages in Dubai for one year – what does it mean?

The tweet from Dubai Municipality read: “Kindly note that the 30 per cent tax collected by Dubai Municipality from alcohol companies has been temporarily suspended for one year starting from January 1, 2023, until December 31, 2023. All companies licensed to sell alcohol in Dubai have been notified of this decision to do the needful.”

What is the 30 per cent municipality tax?

“The municipality tax is the tax imposed by the Government of Dubai. Value Added Tax (VAT) is a consumption tax on goods and services. The 30 per cent municipality tax has been removed on alcoholic beverages, while the five per cent VAT still applies,” Tyrone Reid, Group CEO of Maritime and Mercantile International (MMI) & Emirates Leisure Retail, said in a statement to Gulf News.

African+Eastern also confirmed that the final price of alcoholic beverages will now exclude the 30 per cent municipality tax, but continue to include five per cent VAT.

What are the different taxes imposed?

There are taxes like excise tax (otherwise known as ‘sin’ tax) levied on energy drinks and tobacco products in the UAE, along with VAT, known in some countries as a goods and services tax (GST), and corporate tax on oil companies and foreign banks.

Since December 2019, the excise tax has been levied on specific goods, which are typically harmful to human health or the environment. This comprises 50 per cent tax on carbonated drinks, 100 per cent tax on tobacco products, energy drinks, electronic smoking devices and liquids used in such devices and tools, and 50 per cent tax on any product with added sugar or other sweeteners.

“A ‘sin’ tax is levied on items due to their ability, or perception, to be harmful or costly to society. Sin taxes seek to deter people from engaging in socially harmful activities and behaviours. However, municipal taxes are more of a local tax the authority levies for certain services,” explained Dixit Jain, managing director at The Tax Experts DMCC, a Dubai-based tax advisory firm.

“So, for people to understand, municipal tax will be scrapped, which will save some money from their pocket but at the same time VAT will be applied when they buy, which is 5 per cent.”

Liquor licence fee scrapped

Alcohol licence fees in Dubai have also been scrapped, according to retailers, as per the directives of Dubai Government.

“We are following the directives of the Government of Dubai, so all those eligible to legally purchase alcoholic beverages in Dubai can apply for a personal liquor licence, now free of charge, at … our … stores in Dubai,” Reid said.

How to apply for a liquor licence in Dubai

While you still need to have a valid personal alcohol licence if you wish to purchase, drink, transport or store alcohol at home, the licence fee has been removed in Dubai, according to updates by both MMI and African+Eastern.

To get an alcohol licence, you simply need to visit an MMI or African+Eastern store along with any one of your identity documents – Emirates ID, if you are a resident, or passport if you are a tourist.

Rules to keep in mind

A person must be at least 21 years of age to drink legally in the UAE, and alcohol can only be consumed privately or in licenced public places.

– with inputs from Tawfeeq Nasrallah, Senior News Editor