Dubai has scrapped its 30% alcohol tax in an apparent bid to boost tourism.
It will also stop charging for personal alcohol licences - something residents who want to drink at home must have.
Dubai has been relaxing laws for some time, allowing the sale of alcohol in daylight during Ramadan and approving home delivery during the pandemic.
This latest move is thought to be an attempt to make the city more attractive to foreigners, in the face of competition from neighbours.
The two companies which distribute alcohol in Dubai, Maritime and Mercantile International (MMI), and African & Eastern, said they would reflect the cut in tax for consumers.
"Since we began our operations in Dubai over 100 years ago, the emirate's approach has remained dynamic, sensitive and inclusive for all," MMI spokesman Tyrone Reid told AP.
"These recently updated regulations are instrumental to continue ensuring the safe and responsible purchase and consumption of alcoholic beverages in Dubai and the UAE."
It is not clear if the move, which took effect on Sunday, will be permanent. The Financial Times described the move as a one-year trial, citing "industry executives informed of the decision".
Expatriates outnumber nationals by nine to one in Dubai, known as the Gulf's "party capital", and residents commonly drive to Umm al-Quwain and other emirates to buy alcohol in bulk.
Dubai has historically managed to attract more tourists and wealthy foreign workers than its neighbours, in part because of its tolerance of a more liberal lifestyle.
But now it faces increasing competition from rivals developing their hospitality and finance sectors.
Non-Muslim residents in Dubai must be at least 21 years old to drink, transport or store alcohol at home and have an alcohol licence - a plastic card issued by police.