The United Arab Emirates has finalized details of its new sugar‑based excise tax on sweetened beverages, a major reform to its beverage tax framework that will take effect on January 1, 2026. The move replaces the current flat‑rate excise system with a tiered‑volumetric model that ties tax obligations directly to the sugar content of drinks — a shift officials say is aimed at promoting public health and encouraging healthier consumption habits.
From Flat‑Rate to Tiered Taxation
Under the existing regime, most sweetened drinks are taxed at a flat 50% excise tax, regardless of how much sugar they contain. Starting in 2026, that model will be scrapped in favor of a structure where tax rates vary according to sugar levels per 100 milliliters.
The new system defines three main tiers:
High‑sugar drinks (≥8g per 100ml): Highest excise tax rate.
Mid‑tier (5g to <8g per 100ml): Moderate rate.
Low‑sugar drinks (<5g per 100ml): Exempt from excise tax.
Drinks with only artificial sweeteners: Also exempt from excise duties.
Cabinet decisions have set specific per‑litre tax amounts for the first two tiers, with Dh1.09 per litre for high‑sugar drinks and Dh0.79 per litre for mid‑tier products, while low‑sugar and artificially sweetened drinks incur no excise cost.
Policy Goals and Public Health Focus
The Ministry of Finance says the reform is part of broader efforts to support healthier lifestyles, reduce sugar consumption, and bring clarity to the country’s excise regime. Because the tax now focuses on the fundamental sugar content of products rather than a simple percentage of retail price, manufacturers and retailers will need to reassess product portfolios, pricing strategies and compliance systems before the policy comes into force.
Officials have emphasized that the new framework should help reduce classification disputes and allow businesses to plan more consistently around expected tax liabilities. It may also incentivize producers to reformulate beverages with lower sugar content to benefit from lower tax rates.
Compliance Steps for Businesses
To prepare for the transition, the UAE’s Federal Tax Authority (FTA) has urged beverage companies, importers, and retailers to:
Assess and document sugar levels in all beverages well ahead of the 2026 deadline.
Obtain lab‑verified sugar content certificates from accredited testing facilities.
Register or update products in the FTA’s excise database with accurate sugar data.
Without proper documentation, products may be classified into the highest sugar bracket by default, potentially increasing tax burdens until corrected.
Broader Impact
The tiered sugar tax aligns with similar public health‑oriented tax reforms being adopted globally and is part of a suite of regulatory changes set to shape the UAE’s economic and health landscape in the new year.
Businesses are now in a race to update pricing, labelling, and supply practices, while consumers could start seeing price adjustments on high‑sugar drinks once the policy comes into force.