UAE excise tax: For sugary drink makers, it will not be 50% flat tax any more

Dubai: Rather than one tax fits all, the UAE is incentivizing local producers of sugary drinks by offering up a flexible scheme on what they pay as excise tax.

From 2026, the tax on ‘sugar-sweetened beverages’ will be linked to the sugar content in the product, according to the Federal Tax Authority.

This removes the flat tax that’s been in place on sugary drinks – carbonated and energy – since 2017. In December of 2019, it was extended to sweetened drinks as well.   

“Currently, all fizzy drinks are taxed at a standard rate in UAE - carbonated and sweet drinks are taxed at 50% while tobacco products are at 100%,” said Atik Munshi, Managing Partner at Finexpertiza UAE.   

“Sugar content differs from product to product - hence a more equitable method of tax would be welcomed by both businesses and consumers. Natural sugar in these products is expected to have some relief too on tax (costs).”

* 50% on carbonated drinks

* 100% on tobacco products

* 100% on energy drinks

* 50% on any product with added sugar or other sweeteners.

"We are seeing the UAE is increasingly moving towards healthier choices - and making it a policy lever," said Sandeep Ganediwalla, Partner at Redseer Consulting. "They did that banning single-use plastic bags.

"This tax incentive to cut sugar is not without predecent. The UK and many other markets already have such taxes and have seen 40% reduction in sugar content. So, it has shown to work."

The FTA’s announcement gives UAE sugary drink makers ample time to prepare their product mix and production capacities in time for the 2026 rollout of the tax change.

UAE F&B brands have been by and large dropped their sugary content or switched to alternatives where possible under the heightened health awareness environment. It also comes as UAE battles with the risks of diabetes and obesity.

According to one local producer of sugary drinks, "We have brought down the sugar content significantly in recent years - because that's what is right in today's social and business environment. With UAE announcing a flexible excise tax slab, it's also a reward for our efforts to bring the sugar content down."

The UAE has also been incentivising F&B focused companies to go in for local production where possible. In recent years, this has proved successful in the launch of big-ticket ventures, including production of beverages with sugar content.

The just announced tax incentive thus fits in perfectly into rewarding beverage businesses that go the extra mile in meeting the health priorities of residents.

UAE's excise tax on sugary drinks

* Carbonated drinks that include any aerated beverage except for unflavoured aerated water. Also considered to be carbonated drinks are any concentrations, powder, gel, or extracts intended to be made into an aerated beverage, according to the UAE Ministry of Finance & Investment.

* Energy drinks containing stimulant substances that provide mental and physical stimulation, which includes without limitation: caffeine, taurine, ginseng and guarana. Also considered to be energy drinks are any concentrations, powder, gel or extracts intended to be made into an energy enhancing drink.