From January 1, UAE sugar tax changes how much you pay for sweetened drinks

Dubai: From January 1, 2026, the price of a soft drink in the UAE will depend on how sweet it is. The country is replacing its long-standing flat 50% excise duty with a new tiered tax system linked to sugar content, a shift that aims to drive healthier choices, encourage product reformulation, and ensure fairer taxation across the beverage sector.

Under the new “tiered volumetric model”, drinks with higher sugar levels will be taxed more heavily than those with less sugar. The Federal Tax Authority (FTA) said beverages containing 8 grams or more of sugar per 100 millilitres will attract a Dh1.09 per litre excise, while those with between 5 and 8 grams will be taxed Dh0.79 per litre. Drinks with less than 5 grams, or containing only artificial sweeteners, will be exempt.

This structure replaces the one-size-fits-all model introduced in 2019 and reflects the UAE’s growing use of targeted fiscal tools to support public health and economic diversification.

Stronger link between policy and public health

Officials say the new structure marks a move toward a more balanced and transparent approach to excise taxation. The Ministry of Finance said the goal is to “promote public health and encourage healthier consumption habits across the community.”

The policy comes after years of concern about rising levels of diabetes and obesity in the region. Sugary beverages, often consumed daily, have been identified as key contributors. Studies have linked excessive sugar intake to cardiovascular disease, diabetes, and other chronic conditions that increase long-term healthcare costs.

According to Samer Hasn, Senior Market Analyst at XS.com, the change goes beyond simple revenue collection. “Governments in the region are facing increasing financial pressures due to declining oil revenues and rising healthcare costs,” he said. “I believe it is likely that other GCC countries will follow this trend of imposing a tax on sweetened beverages.”

The UAE joins a growing list of countries, including the UK, Mexico, and Singapore, that use tiered sugar taxes to influence consumer behaviour and cut disease rates through price signals.

Compliance underway across the beverage industry

For the industry, the new regime requires careful preparation and reclassification. The FTA has directed beverage producers, importers, and retailers to verify sugar levels before the deadline. Companies must obtain certified laboratory reports and a conformity certificate issued by the Ministry of Industry and Advanced Technology (MoIAT) confirming the amount of sugar and sweetener per 100 millilitres.

If no certificate is filed, the product will automatically be taxed in the highest band until proper documentation is submitted. Businesses have been urged to review product formulas, update procurement systems, and ensure that inventories and imports are accurately declared under the new framework.

The authority said that “early preparation will help ensure a smooth transition” and warned that companies failing to meet technical requirements risk penalties and misclassification.

What the tax means for manufacturers and shoppers

For producers, the new system creates a clear financial incentive to reduce sugar in recipes and move toward low- or zero-sugar alternatives. Reformulation, however, can be costly. Natural ingredients and alternative sweeteners are more expensive, and companies will need to rework production lines and labelling.

“This tax system will reshape pricing strategies for companies,” said Hasn. “It will force them to restructure their products by focusing on reducing sugar, offering low- or no-sugar alternatives, or emphasising natural options.”

For consumers, the impact will show up on price tags. Regular colas, energy drinks, and high-sugar juices are expected to become noticeably more expensive, while low-sugar and diet versions could be cheaper. Over time, the price gap may influence purchasing trends in the same way it did in countries that adopted similar measures.

Families that regularly buy juices and carbonated drinks may find that the cumulative cost difference favours choices with reduced sugar. Industry data suggests that exposure to sugar-based pricing often prompts gradual habit changes rather than immediate declines in consumption.

Fiscal discipline and diversification goals

For policymakers, the sugar tax is part of a broader move to align fiscal policy with economic diversification and health objectives. Alongside corporate tax reforms and excise measures on tobacco and energy drinks, the sugar-linked system adds predictable non-oil revenues while supporting national health priorities.

“The GCC’s shift to a tiered sugar-tax model indicates a change in how governments view taxation, not merely as a revenue source, but as part of a broader health and preventive policy,” said Hasn. “By lowering the healthcare costs associated with these types of beverages, it contributes to making public finances more sustainable.”

The updated excise rules also align the UAE more closely with international best practices, ensuring consistency across local and imported products. The FTA expects that the clearer legislative framework will reduce disputes and support long-term investment planning by companies operating in the beverage supply chain.

A regional shift gaining pace

Saudi Arabia is scheduled to implement a similar system in 2026, and analysts expect other Gulf states to follow. Bahrain and Oman are seen as likely next adopters, while Kuwait may face more public debate before introducing its own version.

The tiered model reflects a wider shift across the GCC toward integrating fiscal discipline with social policy, using taxes and incentives to encourage healthier lifestyles without imposing direct bans.

The change ultimately puts sugar front and centre in the purchasing decision. The price difference between regular and zero-sugar drinks will now be deliberate, designed to make the healthier choice the easier one.