Key Points You Should Know Right Away
The United Arab Emirates is replacing the flat 50 percent excise tax on sweetened drinks with a tiered volumetric model based on sugar content per 100 millilitres, effective January 1, 2026.
Tax rates will vary depending on total sugar and sweetener content, encouraging healthier drinks and product reformulation.
Low‑sugar or zero‑sugar drinks may be exempt from excise tax under the new model.
Drinks with higher sugar levels will attract a higher excise rate.
What Is the New Tiered Excise Tax on Sweetened Drinks in the UAE?
The UAE Ministry of Finance and Federal Tax Authority have adopted a tiered excise tax model that calculates excise based on a sweetened drink’s sugar content rather than applying a flat percentage. This change aligns with broader health goals while ensuring clarity and predictability for businesses.
Why Is the UAE Changing the Excise Tax Model?
The shift toward a sugar‑content‑based excise tax reflects the UAE’s commitment to promoting public health and reducing the consumption of sugary drinks, which are linked to non‑communicable diseases. It also harmonises UAE policy with evolving standards across the Gulf Cooperation Council (GCC).
How Does the Tiered Excise Tax System Work?
What Are the New Tax Tiers?
Under the updated system starting January 1, 2026, sweetened drinks will be classified by sugar and sweetener levels per 100 millilitres, and taxed accordingly:
Sugar/Sweetener Level | Excise Tax Rate (AED per litre) | Notes |
Less than 5 g | Zero excise | Low sugar category |
5 g to less than 8 g | AED 0.79 | Moderate sugar category |
8 g or more | AED 1.09 | High sugar category |
Drinks with only artificial sweeteners | Zero excise | Exempt |
Exemptions or zero‑rate categories apply to drinks with limited sugar or entirely artificial sweeteners.
Which Drinks Are Affected by the New Tax Rules?
Sweetened drinks under this model include any beverage intended for consumption that contains added sugar, artificial sweeteners, or other sweetening agents. This includes ready‑to‑drink beverages as well as concentrates and powders intended to be reconstituted into a sweetened drink.
Excluded from this new tax regime (or treated separately) are products like energy drinks, which continue to be taxed at 100 percent of the excise price under existing rules. Drinks served in open containers and some natural or medical beverages are also generally not included.
What Businesses Need to Do to Comply
1. Classify Products by Sugar Content
Companies must determine the sugar and sweetener content per 100 millilitres for each product to identify the correct tax tier.
2. Obtain Accredited Lab Reports
To support accurate classification, products should be tested by accredited laboratories, and official certificates must be obtained. Without these reports, products will automatically be classified in the highest sugar category until proven otherwise.
3. Update Product Records with the Federal Tax Authority
All sweetened drink products must be registered or updated in the FTA’s excise system with the correct sugar data well before the compliance date.
4. Assess Pricing and Supply Chain Impact
With tax linked to sugar content, companies should revisit pricing strategies, production plans, and inventory management to account for potential changes in cost and consumer demand.
How Will Prices and Consumer Choices Be Affected?
The tiered excise tax is likely to influence retail prices: higher‑sugar drinks may become more expensive, while lower‑sugar or zero‑sugar options may become more affordable. This pricing structure aims to nudge consumer behaviour toward healthier choices and motivate manufacturers to reformulate high‑sugar products.
What Happens If Drinks Aren’t Properly Classified?
If a product’s sugar content isn’t supported by a certified laboratory report, authorities may default that drink to the highest sugar category, which carries the highest excise charge under the new system.
When Does the New Tax Come Into Effect?
All changes under the tiered volumetric excise tax model become effective on January 1, 2026. Businesses are strongly encouraged to complete compliance preparations well before this deadline to avoid last‑minute issues.
Summary: What You Should Remember
- The UAE is replacing a flat excise tax on sugary drinks with a sugar‑content‑based tiered system starting in 2026.
- Drinks with less sugar or only artificial sweeteners may be exempt.
- Energy drinks and other separately classified beverages keep their existing tax rules.
- Proper documentation, lab reports, and product classification are critical for compliance.
Frequently Asked Questions
What counts as a “sweetened drink” under the new rules?
A sweetened drink is any beverage that contains added sugar, artificial sweeteners, or other sweetening agents intended for consumption, including concentrates and powders.
Are low‑sugar drinks exempt from tax?
Yes — drinks with less than 5 grams of sugar per 100 millilitres and those using only artificial sweeteners are generally exempt from excise tax under the tiered model.
Do natural fruit juices fall under the new tax?
100 percent natural fruit juices with no added sugar are usually excluded from sweetened drink classification for excise tax.
What about energy drinks?
Energy drinks remain subject to a 100 percent excise tax and are not covered by the new tiered sugar system.
Can companies adjust tax already paid on stock before 2026?
Where applicable transition provisions exist, businesses may be allowed to adjust or claim part of the excise tax already paid on stock if the new tax liability is lower.
Why Work with Fintrack Tax Consultants LLC?
Navigating new tax regulations can be challenging, especially with the tiered excise tax on sweetened drinks coming into effect. Fintrack Tax Consultants LLC specializes in UAE excise compliance, helping businesses:
Classify products accurately according to sugar content.
Prepare and submit required documentation.
Optimize pricing strategies and assess supply chain impact.
Ensure seamless compliance to avoid penalties and fines.
Our experienced team can guide you step by step, providing tailored solutions for manufacturers, importers, and distributors across the UAE.
