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How will Dubai’s new alcohol taxation rules affect the hospitality industry?

Hospitality professionals across the emirate share their thoughts

In what some are calling a monumental move, Dubai’s government announced the removal of 30% municipality tax on alcohol purchases for a year-long trial period from 1 January 2023, though VAT of 5% is still applicable. 

In addition, personal alcohol licences are now free-to-obtain for those eligible to legally purchase alcohol in Dubai. A valid Emirates ID or a passport for tourists will still be required to apply. 

Connecting Travel spoke to hoteliers and restaurateurs to see how the new regulations will affect their operations.

Rove Hotels, which offers affordable accommodation, will be passing the full benefit of the Dubai Municipality’s significant alcohol tax cuts directly to its Rovers (guests) from 15 January 15, 2023.

The homegrown hospitality brand’s chief operating officer Paul Bridger, said the generous tax cut will allow restaurants, hotels and other establishments to be much more competitive while still offering premium products and services.

“This is a ground-breaking move that shows the Dubai government’s forward thinking,” said Bridger. “Scrapping the alcohol tax at a time of global economic uncertainty is a masterstroke in boosting Dubai’s attractiveness for tourists, residents and business travellers, who will all notice a significant difference when booking their next Dubai visit.”

Rove Hotels was born and bred in Dubai, and by passing on 100% of the tax cuts to our Rovers, we’re showing our full support of the city we call home.” Paul Bridger, COO, Rove Hotels

Gates Hospitality, the umbrella group behind Six Senses Zighy Bay and several Dubai-based restaurants, also welcomed the move. Founder Naim Maadad said: “It’s the right decision for Dubai to be making such a call and cancelling the tax on alcohol as this is in line with positioning the city as a major international destination that represents value, autonomy and recreation, and one that caters for all nationalities, ages and walks of life.

“It’s very clever to make such decisions in order to keep the city affordable and representing good value. As investors and operators, we welcome such opportunities and make sure to enforce them as soon as possible. Once we receive new prices from our suppliers, we’ll absolutely be passing these reductions onto our customers.”

For bigger hotel chains operating in the region, such as Marriott and Hilton, the price change represents a more complex challenge. 

With large quantities of existing stock, this will need to be sold before the reduced tax alcohol can be purchased and savings passed on. Once bought, the benefit of the saving may also be shared between the hotel operator, the hotel owner and the customer. 

“We’re aware that Dubai Municipality has announced the suspension of the 30% tax on alcohol sales in the emirate for one year. We are currently analysing the implications of the initiative on Hilton’s hotels in Dubai,” a Hilton spokesperson told Connecting Travel.

The UAE’s two alcohol distributors and retail suppliers, Maritime and Mercantile International (MMI) and African + Eastern (A+E) embraced the tax break immediately. 

Tyrone Reid, MMI and Emirates Leisure Retail Group CEO, said: “Since we began our operations in Dubai over 100 years ago, the Emirate’s approach has remained dynamic, sensitive and inclusive for all. Following the announcement by the Government of Dubai to remove the 30% municipality tax on sales of alcoholic beverages, we are pleased to announce that this will be reflected across all alcoholic beverage products in all our 21 MMI stores in Dubai, effective 1st January.”

African + Eastern CEO Jason Dixon added: “Huge credit to Dubai Government for taking such a bold decision. Dubai has always found ways to innovate and drive growth, but this announcement will be especially transformative for tourists and residents. As the largest alcohol distributor in Dubai, African + Eastern welcomes this decision and we will play our role to pass the benefits on in full to consumers.”

When asked what else could be done to support the industry, Gates Hospitality’s founder had a suggestion.

Maadad said: “The next step for me would be to make sure there are multiple retail suppliers in order to make sure value and variety continue to be represented on all fronts and by all stakeholders.”

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