Dubai is to reinstate a 30 per cent tax on the sale of alcohol from January 1, following a two-year suspension of the levy.
Hospitality chains in the emirate said they had been informed of the directive. Alcohol supplier African+Eastern confirmed to The National that it had received notification from Dubai Municipality.
“The suspension of tax has always been on a trial basis, and as a trusted partner of the Dubai Government, we remain fully supportive and respectful of this decision,” African+Eastern said in its statement. “As the news is still very fresh, we are currently assessing the situation and remain committed to delivering the best product, service and value proposition we can for all stakeholders.” The process of obtaining an alcohol licence in the emirate would be unchanged, the statement added.
Dubai Municipality suspended the tax for one year on January 1, 2023. This was extended for a second year, although not officially announced.
How does the alcohol tax work?
Businesses selling alcohol – including off-licence chains such as Maritime & Mercantile International (MMI) and African+Eastern, as well as bars and restaurants – are required to pay the 30 per cent tax.
Venues pay the levy when buying their stock at cost, which is far lower than the retail price paid by the customer. The sale price of a drink also factors in business costs, such as staffing and building rents, and other associated fees.
Abu Dhabi introduced a 30 per cent tax on alcohol sold in off-licences in 2018.
Will drink prices increase by 30 per cent?
If an alcoholic drink costs Dh50 at a Dubai bar this month, will it cost Dh65 in the New Year?
It is not yet clear what action individual businesses will take, but consumers are unlikely to notice large price increases. As the 30 per cent tax is not paid on the final retail price, but rather the initial stock price, businesses will not face having to recoup such a large amount.
If, for example, a business paid Dh15 for a product at stock, the 30 per cent tax would mean the price after tax would rise to Dh19.50.
One industry worker said it was more likely that alcohol prices would rise by about Dh5.
Did customers benefit from the tax suspension?
Some venues reduced prices following the tax waiver, with discounted prices at off-licences. But hospitality leaders did say they would be unable to pass on the savings in full due to rising inflation and operational costs. The rising cost of living – including food and fuel – was a factor for operators.
Nick Comaty, hospitality firm Ennismore's vice president of food and beverage operations and development for the Middle East, Africa, Turkey and India, said at the time that the tax cut in Dubai would offer a huge boost for businesses.
“In general, it is great news for the industry, the business and consumers,” he said. “While alcohol prices are extremely high in restaurants, hotels and bars ― it is not because operators are making a huge margin. I have worked all over the world and our margins were always better than here [in Dubai].”
Tax suspension part of wider changes
The Dh270 personal alcohol licence fee was also scrapped in January 2023. Similar licensing requirements were removed in Abu Dhabi in 2020. Alcohol consumption in the UAE was also decriminalised in 2020 under broader legal reforms.
While alcohol should be consumed responsibly and respectfully, it is not an offence to drink it, as long as a person is 21 or older, and it is done in private homes or licensed premises.
Dubai Municipality and Dubai Media Office have been contacted for further comment.
