Reinstatement of Alcohol Sales Tax in Dubai in 2025

Effective 1 January 2025, the Dubai Municipality re-instated a 30% tax on alcoholic beverage purchases after a two-year suspension.

The context for suspending the tax

In January 2023, the Dubai Municipality announced the suspension of the 30% tax on alcohol sales for a year. The measure was subsequently extended until the end of December 2024.

The suspension was intended to reduce alcohol prices for consumers, in a bid to make Dubai more attractive for foreign visitors and residents, and support local hospitality businesses, in the face of growing competition from regional rivals.

What does the tax on alcohol sales cover?

The tax on alcohol sales is payable to the Dubai Municipality under Decree No. (1) of 2016 Approving Fees and Fines of Government Entities in the Emirate of Dubai (the “Decree”). Specifically, Article 4 of the Decree grants the Dubai Municipality the power to collect from a company or corporation authorised in the Emirate of Dubai to import, re-export, distribute, and supply others with Alcoholic Drinks (i.e. an “Establishment”) a fee of 30% of their total monthly sales of Alcoholic Drinks.

Under Article 1 of the Decree, Alcoholic Drink is defined to mean “any potable liquid that contains no less than 0.05% ethanol. This includes any solid foodstuff in the production or preparation of which ethanol is used at the concentration stated above or a higher concentration”. 

The Dubai Municipality considers “Establishments” to include (without limitation) hotels and hotel apartments, including restaurants and nightclubs within hotel establishments.  

The upshot of re-instating the tax

Anecdotal evidence suggests that during the 2-year suspension, Dubai hospitality venues did not consistently pass on the tax savings to consumers. It is expected that the reinstatement of the 30% tax could result in consumers incurring even higher alcohol prices than before the suspension. 

This could have a downward impact on alcohol sales in hotels and restaurants, particularly in a growing environment of cost-conscious consumers. It could also heighten competition among hospitality businesses in what is already a hyper-competitive market as venues vie to attract consumers based on price. 

Hospitality venues will need to remain innovative and alert to consumer trends. Some savvy Dubai businesses have publicly announced “price locks” on their alcohol prices for 2025, in direct response to the tax’s reinstatement. There is also likely to be a prevalence of new or enhanced “happy hour” or similar discount and promotion schemes. Businesses may also be incentivized to expand their non-alcoholic offerings and look to drive margins on other parts of their offerings (such as food).

Overall though, given Dubai’s ascendancy as a global entertainment capital and strong economic growth, it is possible that consumer behaviour (including that of residents and tourists alike) will not be modified appreciably by the reinstatement of the tax. 

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